M&A Attorney and/or CPA Question

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by a searcher from Salisbury University - Franklin P. Perdue School of Business
in Virginia Beach, VA, USA

3yrs ago

M&A Attorney and/or CPA Question

For a stock purchase- are seller notes allowed?

Scenario:
$3.6m purchase price
$1.1m seller note at 4% over 48 months
$2.5m paid to seller at closing

Due to the seller note am I automatically required to do an asset purchase?

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reply by a lender 3yrs ago
from University of Michigan in Indianapolis, IN, USA

Hi Chuck, Not only is a seller note acceptable, but, from a lending perspective, seller participation/seller carryback, in conjunction with conforming equity, is a credit enhancer. Loans with seller notes perform better than those without.

reply by a professional 3yrs ago
from New York University in New York, NY, USA

If the rate is lower than AFR it can be imputed to be equal to AFR for the recipient of the interest (i.e., increase income). It depends on a lot of factors, so as long as it's at least as high as the AFR you're fine. The AFR can be found on the IRS/Treasury website - you can just google it.