Lender Insights on Creative Structuring for SDE/Revenue Volatility

March 06, 2025
by a searcher from Wayne State University in Detroit Metropolitan Area, MI, USA
Hi All,
looking for Lender insights and willingness to creatively finance businesses that have variable SDE/Revenue over the past few years (assuming most other deal terms being standard).
I’ve gotten several deals under LOI only for the most recent year’s SDE/revenue to be lower (around 10-30%) with the years prior showing steady signs of growth. The Sellers understandably are not enthused about lowering the price/changing the terms considerably but I need to hedge my risk.
Lenders: How can I structure these types of deals to be compliant with the SBA that will allow the potential to pay the Seller the full purchase price should the past year be truly a “one off” year?
Are there ways to structure seller notes, consulting agreements, etc. to function as an earn out without it being considered an earn out? Forgivable seller notes have been considered but my understanding is that the entirety of the note has to be factored into DSCR.
from University of Southern California in Los Angeles, CA, USA
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA