Forgivable Seller Note / Structuring Question

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by a searcher from University of North Texas
in Dallas, TX, USA

1yr ago

Forgivable Seller Note / Structuring Question

Hi All, I'm in negotiations to purchase a franchise business which has excellent history of earnings/profitability but does not have much collateral so I wouldn't think it could go conventional. The owner has offered a forgivable seller note up to $1MM with the caveat that all remaining principal + interest on the seller note is forgiven after 5 years of payments. Is there any way to do this and still go SBA?

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reply by a searcher 9mos ago
from University of North Texas in Dallas, TX, USA

Unfortunately, the deal fell apart due to a variety of reasons. Thank you Benjamin, the structured equity advice is excellent especially if allowed by the SBA 7a loan program.

reply by a lender 9mos ago
from University of North Carolina at Wilmington in Wilmington, NC, USA

This is a great perspective. I hadn't given much thought to tax liability but I can see the future burden. Unfortunately sellers can't have potential future equity or unknown future payout as both are SBA ineligible.