Alternative to the SBA for acquisition debt???

August 04, 2020

by a searcher from Brigham Young University in Kahului, HI, USA

Aloha All!

I have an existing medical billing business that I am very attracted to buying. I am concerned about the experience and personal qualifications required in the SBA process. The SBA is the preferred solution, but I would like to have a backup solution for###-###-#### % debt available since I do not want to let this deal fall apart.

Key criteria:
Business cash flow and profitability are strong.
No real estate or physical assets for collateral.
Purchase price is ~$1.3MM.
Buyer/borrower industry experience is weak, but buyer has multiple successful startups/exits on resume.
Little to no impact by COVID.
Very strong growth potential.

I'd love to hear of any experience or solutions the Searchfunder group has used. I expect to have the equity for this deal put together pretty easily, but will cross that bridge when ready.

Thank you,
Curt

Reply by a lender
from University of Illinois at Urbana in Los Angeles, CA, USA

The deal points you have provided lead me to conclude that this will work for SBA. Keep in mind that while it looks like it will meet SBA criteria, some lenders will add their own criteria and decline it. The lender might require the loan to be fully secured or partially secured by outside collateral. SBA requires lenders to try and get to 1:1 collateral when possible but it is not a deal killer if there is no collateral.

Reply by a searcher
from University of Pennsylvania in Miami, FL, USA

Curt...likely no other option. maybe a local community bank will lend a small amount but you will not find 80% leverage from anyone except SBA at this size deal.
I would reach out to Live Oak -Heather or Lisa. they work daily with searchers who have limited/no experience in the field of the business being acquired. For the most part, they come with smarts and an MBA.

+6 more replies.

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