Deal Analysis and Structure: Manufacturing with real estate and contracted revenue

March 02, 2026

by a searcher from Mahatma Jyotiba Phule Rohilkhand University Bareilly in Denver, CO, USA

I have questions for this wonderful group ⁠- If you are buying a manufacturing business where real estate is owned by the business. How did you structure your deal ? Did you rent to buy or did you buy it as part of the deal? - ⁠⁠If the company that you are acquiring has contracted revenue for the coming year and it is hire then there previous revenue, do you account for that ? If yes, if you could give an example of how you managed it

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Reply by a professional
from DePaul University in Detroit, MI, USA

With real estate, I have seen it done both ways. It depends on what the parties want. The trick is obviously to tear up the existing lease and negotiate a fair market lease if the real estate is staying with the seller. As for the higher revenues, that is just a negotiation point. If it is a solid contract with a good customer, then I guess I would be willing to adjust my EBITDA assumptions upwards to account for it. I am not sure what you mean by how to manage it. Either you use it to justify a higher EBITDA for pegging the purchase price, or you don't. I would certainly make sure that I understood that contract, though. Will it yield the same Gross Profit Margin that the other work yields? Will it force you to add a bunch of OpEx costs?

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

I agree with Matt above. You need to determine what the fair market rent is for the property and determine if the property adds value to the transaction. If you are going to do a sale / leaseback, what the sale / leaseback firm is going to pay is going to depend on what you will pay in rent. So you will need to factor the rent adjustment into the loan unless you plan to hold the real estate. Sometimes you can get the real estate at a good price and that might benefit you as well. Depending on what type of financing you plan to use, holding the real estate can provide some benefit. If you are doing an SBA 7A loan, you can blend the debt for the business with the debt for the real estate and end up with a longer amortization on all of the debt. If more than 50% of the debt is for the real estate, then you can get a 25-year amortization on all of the debt. If 50% or more of the debt is for the business, then you can get a blended amortization with 10 years gets assigned to the business debt and 25-years to the real estate debt, and you end up with a blended amortization between 10 and 17.5 years. This will usually give you a lower payment between 5 to 15% (depending on how big the real estate piece is) versus doing both loans separately because you get to push out the business acquisition piece of the debt. Also, with manufacturing companies, you have the benefit that you can qualify for additional batches of SBA financing over the $5 million SBA limit at future dates. So you could lease the real estate with an option to buy it later using SBA 504 financing. I would be happy to discuss financing options at any time. We can also over a free analysis on the transaction and help you analyze the impact of buying the real estate as well under different scenarios. You can reach me here or directly at redacted

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