Structuring, financing and negotiation of putting together these transactions.
Why does it matter?
Because deals fall apart.
Deals fall apart due to last-minute financing issues, disagreement over working capital, and sellers backing out or changing deal terms. Cold feet at the closing table. The bank not approving the full loan amount. Working capital surprises. These are the moments where hundreds of thousands of dollars are on the line—and deals die.
This blog will walk through real examples and explain how to structure small business acquisitions that reduce risk and close smoothly.
How do we pay for a $1,000,000 business?
Creative deal structuring typically includes a buyer down payment, seller note, SBA loan, and potentially an investor equity injection. One structure—10% down payment, 10% seller note, and 80% SBA loan—is common. But there are variations:
Larger seller notes
Outside equity injections
Reduced buyer down payment through investor support
For a $1,000,000 deal:
Deal 1: Buyer puts up $100,000
Deal 4: Buyer puts up $50,000 (other 5% covered by investor)
At $5,000,000, this is even more significant:
Deal 1: Buyer contributes $500,000
Deal 4: Buyer only $250,000
A well-structured deal minimizes legal, financial, and operational risk for both parties. If you overpay, it’s not just your risk—it’s a risk to the employees and their families. Poorly structured businesses close. That’s why this matters.
$10,000 deposit at LOI
$6M at closing
$750K seller note
Seller note = ~11% of total purchase
$3.2M cash at close
$200K seller earnout
$200K deferred comp for key employees
Deferred comp incentivized employees to stay. Seller wanted to reward his journeymen. Instead of giving bonuses at close, payment was tied to two years of retention.
Buyer acquired 85%
$6.1M cash at close
$700K seller note, 10-year term, 7% interest
Two-year standby with no payments
Adjusted EBITDA of $1.35M was assumed. Working capital not set at a dollar amount in the LOI—this allowed flexibility after due diligence revealed higher needs ($850K vs $500K estimate).
Buyer and seller disagreed on a $1M valuation gap.
Solution? A $1M earnout contingent on hitting revenue targets in 24 months. Seller stayed on as consultant. If targets weren’t met, the seller wouldn’t receive the earnout.
A $5M loan might require $175K SBA guarantee fee and $25K closing costs. SBA requires 10% of total project cost, not just loan amount. This could be $570,000 instead of $500,000.
Sample tables help understand:
Down payment
Closing costs
Potential equity gaps
Creative:
Partial buyouts (e.g., 85% with seller retaining 15%)
Equity rollovers
Investor injections
Pitfalls:
Poor communication
Misunderstanding working capital
Not planning for SBA fees
Unrealistic expectations (e.g., 100% seller financing)
Sellers want legacy and certainty—not just dollars. Deals fail when buyer terms don’t reflect seller concerns.
Deal team = lawyer, SBA banker, CPA or financial due diligence provider.
Start financial diligence immediately after signing the LOI. Allow 90 days. Rushed 30-day exclusivity leads to stress, incomplete diligence, and failed deals.
For those looking to reinforce what was covered in the webinar with actionable insights, you can explore a comprehensive guide titled Negotiating Deals and Structuring Financing Agreements.
Source: FasterCapital – https://fastercapital.com
For a deeper dive into how top dealmakers approach valuation and structure negotiations, the M&A Advisor’s guide on structuring winning deals offers clear insights and case-based strategies.
Strategies for Navigating Difficult Negotiations and Closing Deals – This article from UCFS outlines actionable methods for managing tough negotiations and keeping your transaction on track.
➔ Read the article
If you’re serious about buying in the next 6–12 months, apply to the small business buyer program. We guide you from search to signed deal.
Nothing beats the satisfaction of watching someone buy their first business and leave their W2 job.
Review real examples.
Model your own sources and uses table.
Set a 90-day LOI period.
Join the buyer program if ready.
Ask the seller what they want—not just what you need.
These are real dollars. Structure wisely.
Contact us today to learn how we can support your next deal.