HVAC seller wants to stay on — structuring around SBA's 12-month limit

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by a searcher from New York University - Leonard N. Stern School of Business
in Denver, CO, USA

3h ago

HVAC seller wants to stay on — structuring around SBA's 12-month limit

I'm in active talks on an HVAC acquisition (~$2M revenue) and would love a gut-check on the structure from people who've done this. The setup: the seller genuinely wants to stay involved after close — not to run the business, but to do the part he loves, which is HVAC and supporting the field as a Field Service Manager. He'd actually been planning to push his retirement out another 2–3 years, but he's happy to sell now if he can stay on and keep working the field part-time. I run the business; he mentors techs and stays close to the work. On paper that's the "seller sticks around" risk everyone warns about, but in this case I actually need him to stay, because he's the company's qualifying agent. I need that license in place until I can either (1) earn my own contractor's license or (2) hire a qualifier to replace him. The wrinkle is SBA. Under SOPredacted, a fully bought-out seller can't stay on past 12 months. The workaround I'm pursuing: the seller retains equity (targeting 10%), which lets him stay involved beyond a year — and in exchange he personally guarantees the loan for the first two years, which he's already comfortable with. Also, he has skin in the game to see the company grow. We're aligning on a fair price, and he's genuinely excited to go from owner back to doing what he originally loved. My questions for the group: 1. Is 10% rollover + 2-year PG the cleanest way to keep him on legitimately, or is there a better structure? Anyone navigated this post-SOPredacted? 2. Licensing/qualifier risk in the trades — how have you handled the transition when the seller is the license? Backup plans if I can't get licensed in time and he leaves at year two? 3. Lender appetite for rollover equity — I've heard some 7(a) lenders won't touch partial-ownership structures anymore. True in your experience? How did you find one that would? 4. Exit mechanism for his 10% — what's the right way to set up the eventual buyback (put/call, valuation method, timing) so I'm not stuck with a perpetual minority owner? 5. Governance — anything specific in the operating agreement to keep his 10% purely economic and non-controlling? Appreciate any war stories or "here's what I'd do differently." Thanks in advance.

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reply by a searcher 2h ago
from New York University in Los Angeles, CA, USA

Hi Marc - would be good to connect. I've spent a lot of time evaluating trades businesses and the licensing complexity. DM me and we can set something up.

reply by a professional-advisory 2h ago
from University of Colorado at Boulder in Colorado, USA

THIS IS NOT LEGAL ADVICE. It can be tricky. There is a thesis that, beyond business goodwill, the owner has personal goodwill, separate from the business, which means, in theory, he could be a consultant. But you need to be very forthright with your lender, as it's grey. However, there is case law here. There is an easier way: Equity roll. He has to guarantee with you for a minimum of 2 years. But creates excellent alignment. The SBA will likely force a stock sale here, but by using the 338H(10) election, you can offset some of the negatives and create a buy-sell agreement "option" in the operating agreement. And considering the lincesing required, this might be your only and best option. THIS IS NOT LEGAL ADVICE.