Creative structures for deal unfinanceable via the SBA?

searcher profile

April 26, 2024

by a searcher from Cabrini College in Eagleville, PA, USA

Would love to get some ideas on creative financing structures from the larger group. For context, this deal is unfinanceable via the SBA, but the seller is willing to hold a large note. That said, the seller wants the note to be fully collateralized. Without giving up equity does anyone have ideas around creative financing structures? The seller is open to longer amort terms, rates / structures (assuming we pencil in a balloon payment in 3-5 years), just is not willing to negotiate the collateral position. Appreciate any ideas!

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Reply by a searcher
from Texas A&M University in Irving, TX, USA
Love the blank sheet of paper that appears when SBA is out of the picture - I would keep your existing price but take a 20-35% value off and spin into a type of earnout based on company growing at 10, 20, 30% top line or something with end of year bonuses that pay against that part of the note. Then you could also have a part of the value that is only paid off EBITDA - ensuring you make a living before paying back.. There is a reason the SBA wont loan against it - so you have leverage and can make up a simple but creative deal structure.
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Reply by a professional
in Crystal Bay, NV, USA
A seller note is best when it is managed professionally and transparently with tools from a trusted third party like www.zimplemoney.com. You can also use the ZimpleMoney platform to manage a business lease. Consider structuring the acquisition financing as a lease. After x number of payments the owner relinquishes the business to you at a set price. The business owner retains ownership (Collateral), you control it.
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