How are folks thinking about structuring the seller note differently given the unusual circumstances? Historical guidance was 10-15% seller note ensuring the seller has skin in the game (assuming the remainder is financed through equity and sr. SBA debt.)
How are folks thinking about restructuring this - especially in industries that are considered "at-risk" to exposure to a downturn? Increase the note size? Change the amortization terms? Have some sort of balloon payment to the seller every 12 months (the payment to be financed by the lender or via an escrow?
Any changes to structure to seller notes under COVID-19?
by a searcher
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1) You agree to pay X + Note of Y (Traditional as you spelled out)
2) You agree pay A + "pay more" up to B depending on performance. This is considered "ear-out"'; not allowed by SBA.
3) You agree to pay X + a Note of Y with agreed payment terms. But you also negotiate a "pay less" clause i.e. Y gets reduced based on performance. This is Ok with SBA to the best of my knowledge, but some lenders are not OK with it (See Jeff's comment above)
4) You agree to pay X and a Note of Y, but the payment schedule of Y, but not the amount Y, is tied to performance. You agree that Note Y is completely paid off by, say, 5 years regardless of performance. You could be creative on tis with increasing interest to appease the seller.
There are few more variations.
Increasing the Note does not mitigate the risk of uncertainty.