Latest Seller Note Interest Rates

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July 23, 2023

by a searcher from University of Maryland at College Park in New York, NY, USA

What are the going interest rates for seller notes in an SBA deal?

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Reply by a searcher
from Harvard University in Charlottesville, VA, USA
The interest on the seller note is a yet another important negotiation item, and shouldn't be indexed automatically to a prevailing market rate or index. You may be able to even secure a low or no interest seller note, especially if the seller is willing to show his/her commitment and confidence to the deal. Another handle to adjust is the size of seller note in lieu of the interest rate, which can help address cashflow or DSCR issues. Finally, consider the duration of the seller note, and interest only structures as well -- all of which can shift some of the risk back to the seller. It is important to understand what actually matters to the seller (size of note, interest rate, duration, clawback provision, ability to pre-pay etc. etc.) and negotiate in a way such that both parties benefit. Good luck
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Reply by a searcher
from University of Tennessee in Nashville, TN, USA
Thanks ^redacted‌.

Short answer: Totally negotiable.

Long answer: The Seller is assuming some risk by taking a seller note in a transaction. If you agree from Finance class that rate of the US Treasury Bond is the risk-free rate, start there and negotiate the Seller's risk premium. The Seller may or may not have an interest rate in mind. Most of the seller note rates that have been shared recently have been between 8-12%, an unfortunately wide range to benchmark against. Ultimately, you won't know an answer until you ask it.
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