Any SBA lenders open to growth plans to mitigate high concentration?

by a searcher from New York University - Leonard N. Stern School of Business

2 months ago

I have a deal with high customer concentration (80%) due to a major industry roll-up over the last few years. A small SBA lender told me that if I came back with a plan they could get behind, they would be willing to pitch it to their credit committee because the target does $1.5m SDE running as a lifestyle business.

I have since tried a smaller SBA lender and a large SBA lender with negative results.

I know this is not an ideal attribute for a target, but is it likely I can find an SBA lender who can get comfortable with this 20-year-old 16% CAGR business? If there are any I should connect with, please DM or comment below.

0 likes
86 views
14 comments

lender from University of Missouri - Columbia

Hi Daniel, quite a few quality comments above. I would be happy to discuss with you. I agree with comment above about a forgivable seller note based on customer retention. I do SBA 7a lending. If interested, reach me here or at --@----.com

2 months ago | like reply | 1 like

lender

Hi Daniel, high concentration can be a problem for a lot of lenders, but there are ways to mitigate the deal. I've done numerous deals with 100% concentration and many more above 80%. It all has to do with the risk and how it's structured. One way to help mitigate the risk with the a large concentration customer is to make sure you have contracts in place. If there are no contracts in place look to put them in place. It's also important to show the lenders that you have other vendors that can pick up the ball and run with it should this vendor fall on its face. As you can see it's really all about how you structure the narrative and how you present it to the lender. If it makes sense a lender will do it. I would venture to say most people (non- lenders) on this board would be amazed at the type of deals you can get done with an SBA loan if it's structured correctly.

2 months ago | like reply | 1 like

More on Searchfunder

Just Closed on My First Deal! Reflections and Takeaways for other Searchers

45,152 transactions are available on Searchfunder (now searchable by keyword)

Now everyone has unlimited IBISWorld access

Family office looking for traditional searchers

Examples of self-funded searcher websites

What are market terms for Seller Notes?

2 Best Ways To Find Motivated Sellers, Off-Market Deals

Sorry, but you are a broker's worst nightmare ... and how to fix it

Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.

We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.