Seller Note premium?
November 14, 2023
by a searcher from Cabrini College in Eagleville, PA, USA
Has anyone seen where the buyer's paid the seller a premium to hold the entirety of the note and if so, what would that premium look like? I've spoken to a few folks who've proposed this in the past and wanted to see if there's any benchmarking premiums done in this arena.
from University of Tennessee in Nashville, TN, USA
Yes, if I understand your scenario correctly. My interpretation of your situation is that you have an opportunity for 100% of the debt financing capital stack portion in the form of a Seller Note. Paying a premium to a Seller if they would be the lender in a transaction is often a win-win. As a Buyer, you have the ability to craft more favorable terms of the loan directly with the Seller, qualify for higher loan amounts, and enjoy fewer qualification hurdles than you would likely receive from a traditional lender. As a Seller, they obviously get a higher price for their business, can utilize tax strategies to delay tax liabilities, and receive a first lien position (and maybe a PG) to offer protection in the event of default. It's always a good idea to explore The First Bank of the Seller when its open for business.
from University of Technology Sydney in Sydney NSW, Australia