Hi all,
Hoping to get some help thinking through options for compensating a minority investor(s).
Considerations include:
1. Use of investor funds (e.g. cash to buyout existing owner vs. funding operations/growth)
2. Cash distributions -- at what point does an investor expect distributions or dividend
3. How is my debt (SBA) service considered when calculating EBITDA and reinvestment into the business
And, what else should I be considering when bringing on minority (<20%) investors to fund the acquisition?
Feel free to comment, DM, or email --@----.com
Compensating Investors in Self-Funded Deals (e.g. <20%w/SBA Loan)
by a searcher from University of Maryland at College Park
More on Searchfunder
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.
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.
The SBA will not allow any guaranteed distributions or guaranteed payments to equity investors as part of the operating agreement. You can set it up where certain investors get preferred returns, but none of it can be guaranteed. So in essence you cannot make those payments ahead of making your debt service payments. Because no payments will be required to be made, the SBA and lenders will not count any preferred returns in calculating debt service. As those are deemed to be discretionary payments they will not get factored into the Bank cash flow. I am not sure that is the question you were looking for an answer on, but just in case.
If you have any other questions from a financing perspective, I am more than happy to help out. You can reach me here or directly at --@----.com Good luck with your search.