Seller Financing

searcher profile

April 14, 2024

by a searcher from University of Chicago in Los Angeles, CA, USA

Has anyone done a deal with 100% Seller Financing. If so, any good informations sources or tips?

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commentor profile
Reply by a lender
in United States
Ensure you've engaged with a credible buy-side attorney, such as ^redacted‌, to support due diligence and the legal documentation/seller note. The SBA welcomes 100% seller note refinance credit requests as long as twenty-four months of as-agreed seller note payments have been proven, with a copy of the seller note reviewed/approved by bank counsel and proof of payment history presented to the bank lender. Most banks will require two full IRS-filed business tax return years under new ownership to consider the seller note refinance.

From my career experience with SBA loans, I've observed that every attempt to refinance a 100% seller note where the business buyer used a seller-side attorney or DIY legal templates to cut costs has failed to receive bank credit approval. Do it right out of the gates and pay for the expertise to protect you and the business. A future seller note refinance with a bank backed by the SBA can happen after 24-months.
commentor profile
Reply by a lender
in United States
^redacted‌—as we know, SMB and CRE buyers have purchased businesses or OOCRE with 100% seller financing. From the get-go, the SBA was never involved in these 100% seller notes.

My message here is that 100% seller notes can be refinanced into a bank loan backed by the SBA only after an as-agreed seller note payment history can be proven to the bank lender after 24 months, including sufficient DSCR per the bank credit policies based on new owners' two full years of IRS-filed tax returns.

I've seen 100% seller notes with balloon payments or high-interest rates where the buyer wants to refinance into a bank loan backed by the SBA as soon as that 24-month period has surpassed and the bank refi backed by the SBA is proven a benefit to the owner.

The SBA 7(a) note via a straight-up business acquisition (no CRE) has no prepayment penalty.
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