SBA Lenders – Add-Back Heavy Deal w/ Large Standby Seller Note

March 02, 2026

by a searcher from Le Moyne College in Atlanta, GA, USA

SBA Lenders – Add-Back Heavy Deal w/ Large Standby Seller Note We’re under LOI at $3.5M for a service-based business. Proposed structure: ~$1.8M SBA 7(a) upfront 10%+ buyer equity $1.7M subordinated seller note, performance-contingent/forgivable Buyer stepping in full-time The complication: Tax returns support ~ $1.5M valuation. Internal financials reflect materially higher normalized cash flow due to significant discretionary/personal expenses run through the business and lack of sale prep. We’re willing to price off normalized internal earnings, but need a lender comfortable: Underwriting documented add-backs beyond tax-return income Accepting a large standby seller note Structuring seller carry in an SBA-compliant way Questions: How aggressive are you on add-backs vs. tax returns? Is this within your credit box? Happy to share financials via DM.

Reply by a professional
from University of Central Florida in Atlanta, GA, USA

How did you land of this valuation level? If this is home services, normalized margins with paid mgmt, which the SBA lender will underwrite for, would put this closer to $200-250k of cash flow and they’d likely only offer 3x that at most. Seems hard to justify more add backs when this is already 28%+ and anything more will go away once you add business infrastructure. I just can’t imagine a world where ~9x QofE or 2.5X revenue makes sense for these type/scale businesses

Reply by a searcher
from Le Moyne College in Atlanta, GA, USA

Thanks, it's not home services. Just couldn't find appropriate category.

Join the discussion