Great Deal, with no seller note

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November 19, 2024

by a searcher in Chicago, IL, USA

I am acquiring a HVAC company ($1.8M EBITDA) at a very attractive 3 x multiple but the seller wants an all cash deal. He said he would stay up to 4 years after the sale to run the company but wants no seller note and no equity retained. There are no red flags in the deal and the financials are reviewed.

I can contribute 30% to the purchase price but I'm wondering how the banks would see the deal given that there is no seller note? Do banks do these types of deals? Thank you.


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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
I would confirm some of what has already been said. Many banks prefer a seller note is involved to be sure the seller is engaged, but it is not a requirement. However, it is not a hard requirement and if you have enough equity down you can get away without it. The bigger concern is verifying how you will maintain the licensing post closing. Does the seller have the required licensing to operate or are there others in the organization that can maintain that licensing. Also, if you are doing an SBA 7A loan for the acquisition, you cannot guarantee the seller more than a one-year employment agreement and that agreement has to be on a 1099 basis. This can impact the licensing requirements in some states where the person who holds the license has to be a salaried employee.

If you would like to discuss further you can reach me here or directly at redacted
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Reply by a lender
from University of Southern California in Los Angeles, CA, USA
Seller note is not a requirement. 30% down payment is above market. Would love to help you with your SBA loan. We work with all the major SBA lenders and for the right deal can offer excellent rates like prime + 0% or fixed at prime for 10 years. The bank pay us after your loan closes, so this is a 100% free service for you. On average, we save searchers 0.5% on their interest rate and close deals 30% faster. When lenders compete, you win! You can reach me here or directly at redacted You can also click here to schedule a meeting with me: https://cal.com/ishan-jetley-3d73m8/30min. Look forward to chatting!
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