5% Seller Note on Full Standby

by a searcher from Brigham Young University

1 year ago

Hey Everyone,

I'm looking at a company where I only have a 5% down payment for the loan and would prefer to not bring in investors. However, I'm worried that the seller will back out of the deal if I ask him to carry a 5% note on full standby.

One option I'm considering is offering a price that is 2-5% higher so that the seller receives more upfront value to offset the full standby note.

Any other options I should consider?

1 like
289 views
14 comments

searcher from Manhattan College

Offering the seller a higher purchase price, higher percentage rate, and some equity stake to the seller post sale with a buyout clause especially if the business really takes off. They get the benefit of selling for the price they wanted and still have some equity for downstream upside when you buy them out or if you have a liquidity event from a sale of the business or bring on a capital partner.

1 year ago | like reply | 1 like

intermediary

If you value not including other investors, perhaps consider increasing the interest rate if that gets the seller across the line. Real value to you in being only owner and you might avoid personal guarantees. Assuming you are buying on a reasonable multiple, the higher interest rate will be cheap.

1 year ago | like reply | 1 like

More on Searchfunder

Just Closed on My First Deal! Reflections and Takeaways for other Searchers

45,152 transactions are available on Searchfunder (now searchable by keyword)

Now everyone has unlimited IBISWorld access

Family office looking for traditional searchers

Examples of self-funded searcher websites

Investor seeking Self-Funded Search Deals

What are market terms for Seller Notes?

2 Best Ways To Find Motivated Sellers, Off-Market Deals

Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.

We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.