Can anyone help with Forgivable Seller Notes?

November 25, 2025

by a professional from Indian Institute of Technology, Delhi in Atlanta, GA, USA

Wanted to get some perspective around structuring a 100% forgivable note. Let's assume that the seller note is a 100% forgivable upon gross revenue dipping below a certain annual revenue number. The question I have is for how long is the note forgivable? Is it forever or until the revenue gets above the set threshold? If latter, does the duration of note gets extended by the period for which the note got forgiven/paused?

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Reply by an intermediary
from Texas A&M University in Houston, TX, USA

If you send me an email at redacted I’ll share sample forgivable note language from purchase agreements that has been accepted by multiple SBA lenders.

Reply by a searcher
from New York University in Grand Rapids, MI, USA

I have a forgivable note. You can fine tune them to suit the acquisition thesis needs. Or your own needs. A classic example is one that is forgiven if revenue drops below a certain threshold by %. This is definitely in the sellers favor. As a buyer, I had three forgiveness thresholds: 10%, 50%, and 100%. These were tied to a revenue dollar amount. If we dropped below that number, forgiveness began. E.g. Revenue must stay above $1mm. $1-50k less than $1mm = 10% forgiveness $50k-150k less than $1mm = 50% forgiveness $150k< less than $1mm = 100% forgiveness The forgiveness is dependent on how much risk you have in the acquisition and mitigates it by providing an out. One final note — not as applicable today given current SBA SOPs, but a forgivable note cannot be counted as equity for many lenders. These have to be separate notes if you are leveraging both.

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