Closing next week- lines of credit?

searcher profile

September 19, 2024

by a searcher from George Mason University in Manassas, VA, USA

Hey everyone,

im closing next week (finally) on a $4M revenue business. The bank didn’t offer me a line of credit or working capital (only because I didn’t ask for it back when I didn’t know what I needed): Now they are offering it after closing, but only 60 days later, and very restricted access. They are very conservative.

the issue is there are a number of orders rolling in and projected. The Seller is quoting/bidding folks, for orders that will be approved/placed after closing. Right now I’m looking at $100k in material orders I’ll need to place within the first 60 days.

I’d like to see if anyone out there is willing to work a line of credit for working capital through the SBA for me?

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commentor profile
Reply by a searcher
from The University of North Carolina at Chapel Hill in Austin, TX, USA
Can you put in/raise more equity to cover the gap? Another solution, on the debt side, outside of the bank is the seller. You can often negotiate with them to have them leave some money in the business to cover working capital. They are also invested in you running the business successfully after close, if there is a seller note involved.

You're in a very tough position, Chris. Typically, the bank will make sure you have the working capital to run the business before approving a loan. If you have investors, they should have said something as well. It is much harder getting capital after closing because you are a brand new business, if you're using a new entity, without any history, and the senior lender has the rights to all your asset, so it would be very risky for anyone else to lend you money, i.e. the terms you will get from anyone willing to do it would be very expensive to match the risk involved. Also, keep in mind placing the $100K of orders does not equal payments coming in. The $100K doesn't turn into cash until you sell the products and receive payment which could be another 30 days after sales. So you will need a lot more than just $100K.
commentor profile
Reply by a searcher
from George Mason University in Manassas, VA, USA
For anyone who may read this later wondering the same thing- I ended up talking the archaic bank into an SBA working capital loan, at the same time there were plenty of banks willing to offer on evidence of AR or taking a 3rd position on PG assets. The bank took like 3 months to close the others closed within a couple weeks once I agreed. Other banks offered to loan SBA back with no issues but I hadn’t worked with them before psi passed. I had plenty of other offers and there are brokers who specialize in that now.

Simultaneously I found an investor and should have more coming in.

Anyone who says a bank won’t do it is wrong and outdated.
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