Looking for help regarding SBA loan structure

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March 31, 2023

by a searcher from Howard University - School of Business in Rockland County, NY, USA

I am in the process of receiving an SBA loan for a bread and baked goods distribution business and wanted to know if there is a way to keep or bring back the seller post-closing. If anyone is experienced in this area, I would love to chat about some creative ways to structure this deal.

Thank you.

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Reply by a searcher
from California State University, San Bernadino in Tustin, CA, USA
SBA is a special case where you have to watch what you can legally do but things like paying a percentage of new business brought in finders fee, including them for 6-12 months as an employee (careful with wording this one), giving them a piece of the holding company, or best having the seller finance part of the deal and tying that remuneration to maintaining current performance - although SBA disallows some things based on growth - are all ways to entice the seller.
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Reply by an investor
from University of California, Berkeley in San Francisco Bay Area, CA, USA
The official answer is that the seller can only be involve for up to 12 months after closing. There may be ways to get around this, but I highly recommend you don't rely on the seller after closing and run the business yourself asap. In most deals I have seen, the seller disappeared very quickly. You need to get up to speed quickly and assume that the seller will not stick around (and in most cases you don't want them to be around for an extended period of time).
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