LOI Tips/Advice for Preventing Key Client Loss?

searcher profile

October 20, 2023

by a searcher from Georgia Institute of Technology in Atlanta, GA, USA

Do any searchers, attorneys, lenders, etc. have language that they'd recommend for preventing revenue attrition as a result of key client loss post-sale? I want to avoid an earn-out or any language that the SBA would reject, however, this particular deal has a seller note and I am hoping there could be opportunity to forgive some of the seller note payments if there is a decrease in revenue. Any advice or ideas are appreciated!

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commentor profile
Reply by a searcher
in Denver, CO, USA
I've structured a few of my LOIs to include multiple seller notes - one thats guaranteed, one that's forgivable on a schedule/tiers tied to metric.

As an example, I've used language like:

"Note (B) forgivable if CY24 revenue is less than CY23 according to the follow schedule:
https://share.cleanshot.com/XgGp8Yf0"

(I got this from @benbortman @ Slackwater)
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Reply by a lender
from California State University, Sacramento in Seattle, WA, USA
Forgivable seller notes are a great way to help mitigate risk on customer attrition. Curious if your opp has a large tie to a few customers or if you’re generally just trying to protect for a good transition. +1 to Dan and looking at resources from ^redacted‌
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