Deferred Seller Notes

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December 12, 2023

by a searcher from University of Pennsylvania - The Wharton School in Tampa, FL, USA

How practical is 2-year deferred seller note being counted as equity by the SBA? What about 5-years? Anybody have experience in this area?

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
We are a Commercial Loan Brokerage Shop with over 50 SBA lending partners. I will tell you that most SBA lenders are accepting a seller note on a two-year standby as counting towards a portion of the equity. However, few are using it for the entire equity requirement. Most SBA lenders are still requiring at least some money down from the buyer, usually a minimum of 5%. The cases where we see 0% down are typically cases where it is an employee buying out the owner, the buyer has substantial direct industry experience, of the buyer runs a company in the industry now and this is an expansion loan.

You can certainly put the seller note on standby for a longer period of time. Prior to the recent SBA updates, in order to count as equity the seller note had to be on standby for at least 10 years. If you have a seller note on standby longer, that might make a lender more comfortable with using more of it for equity, but to be honest, we have yet to test that theory with any of our lending partners. I would still suspect most will want at least 5% equity unless you fit one of the parameters already discussed above. If you would like to talk in more detail, feel free to message me here or directly at redacted Good luck with your search.
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Reply by a searcher
in Rindge, NH 03461, USA
The SBA allows a 10% seller note, on full stand by for 2 years to be counted as ALL of the 10% equity from borrower. And I finally found an SBA lender who will do it! Hit me up at redacted for details. Some conditions apply. Sven
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