Combining SBA loans, seller financing, SBIC, and other financing sources
June 11, 2022
by a searcher in Charlotte, NC, USA
Hi Searchers,
I am an experienced entrepreneur, but I have no first hand experience using debt and creative structuring to finance a business acquisition.
I would like to learn more about best practices for creative deal structuring based primarily on debt. The main goal being the least amount of cash out of pocket as possible. Such as SBA 7a 90% + seller note 5% + cash 5%.
Also, I would like to learn more about the "rules" of using the acquired company's cash flow to service the debt.
If any of you have sources that you are willing to share such as books, youtube, people, consultants, finance companies, banks, websites, etc , I would be grateful.
from University of Rousse in Bulgaria
1. It is government backed loan, which a large portion of it is backed by the US Government if you default. However, this applies only to US Citizens only, not permanent residents or illegal aliens
2. You can use SBA to finance the business you are acquiring, but you still have to come up with the remaining 10-15% from an investor, SBA does not finance the 100%. Seller note is another great example, if they are motivated.
3. if you have a signed Stock Purchase Agreement of that business and you acquire not only the assets, but also the shares, you can close that deal with SBA financing, as long as cash flow covers debt service and use the project’s cash flow as collateral for the loan - as if the project / company / business takes that SBA loan and the project's asset's are collateral. This setup is suitable only if you have some track records, otherwise lenders will always ask for personal guarantee. Once you have that track record, personal guarantee is not needed and unsecured loans are more favourable. It's a about relationship banking. It is all negotiable.
from The University of Chicago in Chicago, IL, USA