Interest Rate Impact of Deal Structure

Great back and forth, thanks!

I think the higher interest rates allows an opportunity for a buyer during negotiations re: seller notes. Prior to last year seller's could get away with high multiples and little/no seller note since (some) bank's were willing to finance the whole deal at 90%+. The higher interest rate allows you to make the seller note more palatable for a seller now. As an example, a $2M SBA loan at 10% (P+2.25%) has and APR close to 10.8% when you factor in the SBA guaranty fee and basic closing costs. So paying a seller 9%-11% interest on a seller note isn't necessarily a high rate today. This allows you the opportunity to push the seller on more favorable terms (i.e. larger seller notes, deferred payments, interest only) and still make it benefit both parties. When the rate on an SBA loan was in the 5's this wasn't as great of an option since the return was weak for a seller and it made no sense for a buyer to pay a high rate of return when the SBA rate was so low. This won't impact the multiple you pay, but could give you an advantage v. other buyer's if you really want a company. Being creative on the purchase price v. the cash at close can hopefully give you a leg up on the competition.