Forgivable seller note SBA question

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November 15, 2025

by a searcher from University of Texas at Austin in Houston, TX, USA

I’m submitting an LOI on a deal and have about 300k of “valuation gap” to get to a purchase price acceptable by the seller. Im thinking of structuring it as a forgivable seller note (5 year standby + 5 year amortization) but im not sure if thats acceptable per SBA.
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commentor profile
Reply by a lender
from California State University, Sacramento in Seattle, WA, USA
Not all lenders are going to exclude the seller note payments from DSC calc as the note isn’t on full standby and payments are going to be required during the life of the SBA loan (if I’m understating your scenario.). As long as the claw back metric is based on historic performance such as last years EBITDA or existing customers transitioning, there are a lot of options. The third party business valuation is supposed to support the purchase price when including a forgivable note. Call for specifics. We have an exec summary template for you to share your buyside overview with us. redacted
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Reply by a lender
in Ponte Vedra Beach, FL 32082, USA
That would be acceptable for SBA and most lenders will be able to remove the loan payment from debt service call with the long standby. You will need clear verbiage in purchase agreement on what the forgive-ability terms are. Happy to discuss in more detail anytime; cell is###-###-#### or you’re welcome to schedule directly via my Calendly; https://calendly.com/bturner-thebancorp/45min
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