How to Setup Terms of Seller Financing

[Glenn Jones]

Hi - I am looking to close my first deal on a marina in the the North East.  With interest rates on the rise my deals are making less sense when factoring the cost of debt repayment using SBA loans.  I am hoping to get a little creative with the financing to get better debt repayment costs.  The marinas I am looking at range from 1.5 - 3.0 million dollars.  I am hoping to put 10 - 15% down of my own money in the deals with the owner either financing the whole deal or up to 30%.  The balance of the loan would be financed with an SBA loan.  I have never done this before so I am hoping some seasoned pro's can give me some advice on how to setup the terms. Below is what I am thinking for a $2M property for example:

- 2.0M purchase price

- Buyer puts 10% down (200K)

- Seller hold note for 30% (600K) for 10 years at 5% with 25 year amortization.  No interest year 1 and 2 to get past anticipated recession

- Balance of purchase 60% (1.2M) financed with an SBA loan.  I am assuming an interest rate of about 7.5% for 25 years

Looking for input on this scenario.  Am I missing anything in the terms that could help me pay less per month?  How do I determine the monthly payment during the no interest term?  Also, from speaking to the bank, I am told I have a 3-2-1 pre-payment penalty on the SBA loan.  I am hoping that rates will come down in the next few years so i would re-finance the SBA loan at that time taking into consideration the penalties.  Would I need to also refinance the seller note at the same time?

Thanks,

Glenn