Seller Notes current rates (Nov 2024)

November 25, 2024

by a searcher from The University of Michigan - Stephen M. Ross School of Business in Detroit, MI, USA

I'm looking at structuring an LOI with both Forgivable seller note paid over 6 years (because of extremely high customer concentration) and a standby seller note(standby for 2 years then paid over next three). What would be the current norm for interest rates, with prime at 7.75 % ? Is there any incentive for the seller to accept lower rate than I can get from SBA lender? If this makes any difference, the seller is from EU(France).

Thanks

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Reply by an intermediary
from Wake Forest University in Winston-Salem, NC, USA

All depends on: the quality and attractiveness of the company, how much the bank is willing to take (i.e., if 90% LTV vs something less), the experience and financial strength of the buyer, and the overall terms and structure of the deal. That said, 6-11% interest (can be fixed or variable), 10-year am, 6-year balloon. The 2-year standby is fading away, it is a remnant of a no longer existing SBA requirement that was in place a few years back (except for when the seller finance is being used to count as equity injection).

Reply by a searcher
from IMD in Orlando, FL, USA

7(a) loans do not have a minimum loan amount and max out at $5 million. The SBA guarantees 85% of your loan if it’s less than $150,000 and 75% if it’s more than $150,000. However, it limits guarantees to $3.75 million.
Current SBA 7(a) loan interest rates Fixed rates:
$250,001 or more 12.75% with prime rate at 7.75% SBA loans aren’t easy to qualify for. Learn about SBA loan requirements to make sure they’re right for you.

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