Cash vs stock vs seller note

Cash vs stock vs seller note at a glance

Factor	Cash at closing	Acquirer stock	Seller note
What you hold	Money	Shares in the buyer, usually locked up	A loan to the buyer
Main risk	None after closing, apart from indemnity claims	Share price, thin trading, dilution	Buyer default; weak collateral
When you can spend it	Immediately	After the lock-up and any Rule 144 holding period	As payments arrive, often over 3 to 7 years
Typical source	Private buyers, regional operators	Public multi-state operators	Almost every buyer type
Federal tax timing	Year of sale	Generally year of sale on full value, unless a tax-deferred reorganization applies	Installment method for qualifying gain; recapture and inventory taxed in year of sale
Your ongoing role	None	Shareholder in the buyer	Creditor; often a disclosed financial interest holder
Upside	None	Yes, if the shares rise	Interest income only
Regulator angle	Source of buyer funds is reviewed	Public-company owners are disclosed	Note terms and security may be reviewed; enforcement needs approval
Discount to face value	None	Large and variable	Moderate, driven by security and buyer strength

Why do so few cannabis deals pay all cash?

Because the usual sources of acquisition cash are closed. SBA SOP 50 10 8, effective 1 June 2025, makes marijuana businesses ineligible for 7(a) and 504 loans, and conventional banks do not lend against cannabis goodwill. Private cannabis credit is aimed at larger borrowers. Public operators, for their part, hold little spare cash. Viridian Capital data reported by Forbes in January 2026 put cash at under 2% of disclosed cannabis deal consideration in 2025.

Small private deals carry more cash than that figure suggests, but still a mix. TerrAscend’s July 2026 agreement for a New Jersey dispensary was priced at $9 million, including a $3 million five-year convertible note. The funding picture is in why SBA and banks are unavailable.

Cash: what it is worth and what it costs you

A dollar of cash at closing is worth a dollar. Nothing else in an offer is.

The cost is a lower headline price and a smaller buyer pool. A buyer who pays cash takes all the risk of the business from day one, and prices that in. Insisting on all cash also excludes first-time operators and many regional groups who could pay more over time.

Two cautions. First, “cash” is not always paid at closing: check for escrows, holdbacks for tax clearance, and working-capital adjustments, which are covered in tax liabilities and holdbacks in a sale. Second, regulators review the source of the buyer’s funds, so a cash buyer whose money cannot be documented is not a safe buyer.

Stock: what are you really being paid?

Stock consideration makes you an investor in the acquirer, on terms you did not choose, for a period you cannot shorten.

• Lock-ups. Real terms vary widely. Curaleaf’s 2023 Deseret Wellness deal released half the shares at 6 months and half at 12. Vireo Growth’s December 2024 acquisitions carried a 33-month staged lock-up with EBITDA clawbacks.
• Securities law. Unregistered shares are restricted. Under SEC Rule 144 they must be held at least six months if the issuer is a reporting company and one year if not.
• Liquidity. Most multi-state operators trade on the Canadian Securities Exchange and U.S. OTC markets, where a seller’s block can equal many days of trading volume.
• Tax. In a taxable sale, the IRS treats property other than money as “a payment in the year received”. Tax on $2 million of locked shares is due with that year’s return, from other funds. A corporate seller may be able to defer gain through a reorganization under section 368; most LLCs taxed as partnerships cannot.

Negotiating points such as collars, price floors, and registration rights are covered in selling for MSO stock. Stock can pay off. It should be valued as a volatile, illiquid holding, not at the reference price in the term sheet.

Seller note: you become the bank

A seller note turns part of your price into a loan. Its value depends on the buyer’s ability to pay after tax and on what you can take if they do not.

Terms. General small-business seller notes run about 6% to 10% interest, according to Morgan & Westfield data cited by Iconic in August 2026. Cannabis notes are negotiated deal by deal, often five years, sometimes with a balloon. Compare that rate with what professional lenders demand for cannabis credit risk: Chicago Atlantic Real Estate Finance reported a 15.8% weighted average yield to maturity on its loan book at 30 June 2026. A seller lending at 9% is pricing the loan below market, which is a hidden price concession.

Security. Licenses are generally not transferable, so, as Harris Sliwoski’s cannabis secured-lending guidance puts it, a license should not be listed as collateral; lenders take a pledge of ownership interests instead, and the secured party’s financial interest usually must be disclosed to the regulator. In practice a seller asks for:

1. A meaningful down payment, so the buyer has money at risk.
2. A pledge of the equity in the licensed entity.
3. A lien on equipment and other assets, perfected by a UCC filing.
4. A mortgage or deed of trust if real estate is in the deal.
5. Personal or parent-company guaranties.
6. Financial reporting and covenants, such as limits on new senior debt and on distributions while the note is unpaid.

Enforcement. Taking back the equity is a change of ownership. It needs regulator approval, and you need to be eligible again. The collateral law is covered in seller notes and security interests, and deal terms in seller financing in cannabis deals.

Tax. The installment method generally spreads qualifying gain over the years you are paid, but IRS Publication 537 requires depreciation recapture to be reported in the year of sale, and inventory does not qualify.

A worked comparison of three offers

Illustrative only. Three offers for the same dispensary. The discount assumptions are examples, not market data; choose your own with your advisers.

	Offer A: all cash	Offer B: cash plus note	Offer C: cash plus stock
Headline price	$2,600,000	$3,000,000	$3,600,000
Cash at closing	$2,600,000	$1,500,000	$600,000
Deferred piece	None	$1,500,000 note, 9%, 5-year monthly amortization	$3,000,000 of shares, released at 12, 18, and 24 months
Adjustment	None	Payments of about $31,140 a month, discounted at 15%: about $1,309,000	35% haircut for price risk and illiquidity: $1,950,000
Risk-adjusted value	$2,600,000	About $2,809,000	About $2,550,000
Cash at closing as share of headline	100%	50%	17%

Three things follow. The highest headline, Offer C, ranks last once the shares are discounted. Offer B leads by about $209,000, but only if the buyer pays: the 15% discount rate reflects time and general credit risk, not a specific weak buyer, and a thin down payment or poor collateral would justify a higher rate. And Offer C may not leave enough cash to pay the tax on $3.6 million of proceeds. If the seller’s combined tax were, say, $700,000, Offer C would require $100,000 from the seller’s own pocket in the year of sale.

The seller-note and sale-leaseback calculator lets you run the note side with your own numbers.

Which fits you?

Lean toward cash if:

• You are retiring or leaving the industry and do not want exposure to it.
• You have debts, liens, or partner buyouts to settle at closing.
• The non-cash offers come from buyers you cannot diligence or whose approval is doubtful.

Consider a seller note if:

• The buyer is an operator you trust, with a real down payment and a record in your state.
• There is hard collateral, ideally real estate, and guaranties behind the note.
• The premium over the cash offer is large enough to pay you for lending at a below-market rate.
• The business can service the note from cash flow after 280E taxes, not just before them.

Consider stock if:

• You have read the acquirer’s filings and would buy the shares with your own money.
• Cash at closing covers tax on the whole deal.
• You negotiated the lock-up, a pricing date near closing, and limits on any clawback.
• The stock is a minority of your total proceeds, or you can afford to lose it.

Most signed deals are a blend, and buyer type largely determines the blend; see selling to an MSO vs a private buyer. If a gap remains on price, an earn-out can bridge it, but count it as upside only.

This comparison is educational and is not tax, legal, or investment advice. Nothing here predicts the value of any security or the performance of any buyer.