Forgivable seller note SBA question

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by a searcher from University of Texas at Austin
in Houston, TX, USA

7mos ago

Forgivable seller note SBA question

I’m submitting an LOI on a deal and have about 300k of “valuation gap” to get to a purchase price acceptable by the seller. Im thinking of structuring it as a forgivable seller note (5 year standby + 5 year amortization) but im not sure if thats acceptable per SBA.

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reply by a lender 7mos ago
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Yes, you can use forgivable seller notes with SBA loans. We have helped structure them for many clients. If you need assistance, you can reach me here or directly at redacted There are some nuances to be sure they are compliant with the SBA rules.

reply by a lender 7mos ago
from California State University, Sacramento in Seattle, WA, USA

Not all lenders are going to exclude the seller note payments from DSC calc as the note isn’t on full standby and payments are going to be required during the life of the SBA loan (if I’m understating your scenario.). As long as the claw back metric is based on historic performance such as last years EBITDA or existing customers transitioning, there are a lot of options. The third party business valuation is supposed to support the purchase price when including a forgivable note. Call for specifics. We have an exec summary template for you to share your buyside overview with us. redacted