Seller's Note, Earn Out Structures

The best success is getting a seller to do both a seller equity rollover and then doing a seller note. You can save alot of time and possibly alot of legal hoops to jump through with a seller note instead of going the route of bank debt. There is alot less red tape going that route.

Try rollover equity deals. For example buying 75% of the business and letting the seller retain 25% (doesn't work for SBA though). Structure it so that for the first X number of years, you are the only one that can pull cash out of the business for the sole purpose of repaying acquisition debt . Then after year X years, normal distributions based on ownerships take place (75 / 25). I would recommend agreeing on the valuation upfront of the last 25% (for example, buyer will pay 5X of the EBITDA at the time of purchase of the remaining equity).