If you sell your business and carry a note, somebody has to collect the payments, apply them correctly, track the balance and produce the records for tax. A third party servicer does that for a modest fee, and the reason to use one is less about convenience than about what happens when a payment is late.
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What a servicer does
Sets up the loan on their system, collects payments by direct debit or transfer, applies them between interest and principal, sends statements to both parties, produces year end tax reporting and maintains an auditable record of what was paid and when. Some also hold escrowed amounts and handle payoff calculations at the end.
Why it matters when things go wrong
A dispute about a seller note usually turns on the record: what was owed, what was paid, when, and how it was applied. A neutral servicer's ledger is far stronger evidence than a seller's own spreadsheet, and having one removes the personal friction of chasing somebody who now runs the business you built.
What it costs and how to set it up
A setup fee and a small monthly charge, commonly split between the parties or paid by the borrower. Agree in the purchase agreement who pays, which servicer is used and that the arrangement continues until the note is repaid. Doing this at closing is straightforward; retrofitting it after a missed payment is not.
Questions people ask about loan servicing companies for seller financing
Is a servicer required?
No, and many seller notes are collected directly. A servicer becomes clearly worth it where the note is large, the term is long or the relationship may become difficult.
Does using one help with tax?
It produces the interest and principal split and year end reporting, which makes the installment reporting simpler. Your accountant still advises on the treatment.
Can the servicer enforce the note?
No. Enforcement is a legal step you take, though the servicer's records are what you would rely on to take it.