Seller Note terms for Bank

September 15, 2024

by a searcher in Chicago, IL, USA

For Non-SBA deals, how long does the seller note need to be on standby for lenders not to factor it into the debt service and overall risk analysis for the deal?

I'm negotiating with a Seller at the moment and he has agreed to put the seller note on hold for 5 years.

The deal is a 4 x multiple and the seller note is 35%.

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

For non-SBA deals there is no hard rule. It is all about how individual lenders will look at it. But in general, if the note is on standby for an extended period of time, most conventional banks will not put it against historical cash flow. If you have additional questions you can reach me here or directly at redacted

Reply by a searcher
from Ivey Business School at Western University in Saint John, NB, Canada

^redacted‌, thanks for the tag. Each bank/lender will have a different policy: the amortization period, interest/principal payment eligibility and amount, and covenants (e.g., cash flow or leverage ratio) must be considered.

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