Multiple Seller Notes/Full Standby

searcher profile

February 24, 2023

by a searcher from George Washington University in New York, NY, USA

Hi, I'm investigating potential deal structures and I'm curious about multiple seller notes vs. 1 seller note. Under the SBA, you can meet the 10% equity injection through a 5% full-standby seller note. Is it common/allowed for multiple seller notes to be present on a deal (i.e., one note is 5% full standby, another note is X% non-standby)?

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commentor profile
Reply by an intermediary
in Kansas City, KS, USA
Yes, you can have multiple seller notes with different structures, but keep in mind that with many/most SBA loans, any seller note is subordinate to the SBA loan in repayment, so you can't begin actually paying the seller until the SBA loan is paid off. That might be 5 or 7 or 10 years...so it's pretty un-enticing for the seller to know they won't see a penny for years and years.
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Reply by a lender
from Pennsylvania State University in Tampa, FL, USA
Absolutely ^redacted‌ - it will come down to the DSCR. It isn't abnormal to have one on standby counting towards the equity and another along side - I'm doing a deal now where one is on full, and a second is on a 6 month standby. Hope this is helpful!
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