During acquisition I like to offer around 1-3months average profit for down payment, on the the condition that the owner is willing to stay around for a short term to introduce me to "company contacts" (Suppliers, Key clients, VIP associates, and employees, etc) This gives me the peace of mind and them the same of actually being on the same page.

Parties may do this for any number of reasons, maybe the parties are less than arm's length, or the seller doesn't want to report the interest income to the IRS, etc.If the seller financing is part of the purchase contract (as it should be, for everyone's peace of mind), with all its terms and conditions laid out between a distinct buyer and distinct seller, then the interest probably WOULD be deductible, and the the seller would report the income as taxable.