Did you use a Seller Note Standby Period?

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September 17, 2024

by an member from University of Washington in Mount Vernon, WA, USA

Hello again,

I'm helping out a self-funded search fund and I want to get a guage on how common standby periods are in seller notes. Did you use one in your deal and was it difficult to obtain?

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commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
It depends on what you are trying to use the seller note for. If you are using the seller note as part of the required equity in an SBA loan process, then having a two-year standby period or two years interest only is required. You can always do multiple seller notes on SBA deals, with one on standby to meet the equity requirement and the other not on standby. If it is not an SBA loan, I see various deals getting put together. Sometimes there is a standby period, sometimes not. It really depends on what the buyer and seller agree to. If you have additional questions on seller notes you can reach me here or directly at redacted Good luck.
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Reply by a searcher
from University of California, Berkeley in Sunnyvale, CA, USA
I would say it's not uncommon. On the other side, it's important to know whether and how long you need the period. Build the financial model and check whether no standby may causing negative cashflow, especially when you're also taking other debt. If that's the case you have to request the standby to make the operation sustainable.
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