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?

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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

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