Alternatives to rollover equity

by a searcher from Dartmouth College

Feb 17,2023

According to SBA loan terms, a seller may not roll over any equity during a SMB transaction. Earnouts are also not allowed. Any creative structures that present good alternatives? Very interested in hearing more about all your experiences, so please share!

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5 comments

lender from Eastern Illinois University

I concur that your best option is to build it into a seller note. You can set the purchase price higher at closing and have the seller carry back the risk with a seller note. You just have to be cautious to be sure the debt service still works. You can then build a forgiveness into the seller note if certain reps and warranties or conditions are not met. I would be more than happy to jump on a call to discuss in more detail at any time. You can ping me here or directly at --@----.com

02/20/2023 | like reply | 0 likes

searcher from Northwestern University - Kellogg School of Management

Just structure the earnouts as a clawback and the SBA will approve.

02/19/2023 | like reply | 0 likes

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