SBA <> Seller Note

Great stuff here. When I do M&A deals where a seller refuses to take a Seller note (typically because the Seller is already in their 80's and doesn't believe they will see the end of the note), a Seller will typically be fine with a haircut on purchase price if it gets the deal done. Sellers are always adding buffer room into their listed sale price.

An additional tool you have is to preorder your 3rd party business valuation. This typically costs $2.5k - $5.0k, and you will be able to use the report for up to 12 months. If the valuation were to state the business is worth $3MM and the Seller won't budge off of $3.5MM, no one can buy the business (via SBA), because a bank cannot lend over the FMV of the business per the SBA. It is a compelling tool to renegotiate the purchase price with a Seller. Please note: this tactic comes with risk, because if the Seller rebuffs you, you are out the cost of the business valuation. If the deal gets done, you can use the cost of the business valuation as part of your injection.

The seller note can also be full standby as well. That may be less attractive for a buyer if your SBA debt is 10+ years. Something to consider. I'm in agreement with Brad Hettich on the ability to avoid a clawback.