Transition Services Agreement in SBA Funded Deals

May 16, 2023
by a searcher from Northwestern University in New York, NY, USA
Question for you successful searchers out there that funded their deal(s) with the SBA 7a program:
How did you structure the transition period? Assuming the sellers were employees and officers of the target, did they resign at closing and became 1099 contractors? Did they receive 'regular' pay, or did you compensate them per hour worked? How did you deal with insurance and benefits for the transition period?
Any examples and data points are much appreciated! DMs are open too
from The University of Michigan in 1075 Gills Dr, Orlando, FL 32824, USA
It's company/industry dependent and you many not need the owner to stay on that long but I was glad he did. There's also some risk that your personalities will clash or that the previous owner won't like having a boss. I was fortunate that this individual is an amazing person and we're still close today. During the DD process we really hit it off so by the time we closed I felt that risk was minimal but it's definitely a risk.
Also remember, you can always ask them to leave early but it will be difficult to convince them to stay after the agreed upon transition period.
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA