Does anyone know an SBA lender that would entertain this deal?

October 28, 2024

by a searcher from University of Texas at Austin in Dallas, TX, USA

Quick question, curious if you all know of anyone out there honoring the new SBA guidelines for partial buyouts and would consider financing something like this:

The deal: a partial (>95%) buyout in the $3-4 million range for a phenomenal biz doing about $900K in SDE
The catch: a risk appetite that can swallow 0% equity, $1M in unsecured collateral, and DSCR lower than 1.25
The team: Oxford MBA and UT Austin alum with strong operating background and track record

We know this structure is now backed by the SBA guidelines in theory. However, despite the fact that our capital partners all love this deal we are not having much luck finding any capital partners that can greenlight this structure in practice.

In case we can't find a SBA lender willing to honor this in practice, we are also looking for capital partners to fund the equity injection which would be $380K. Company has been around for 40 years, run absentee with $7M in revenue and high SDE (avg $879K) for the last 5 - and we are considering raising the equity injection for the SBA loan, term sheet in hand. Happy to send over details of the deal to interested investors.

Reply by a lender
from California State University, Sacramento in Seattle, WA, USA

You don't mention any seller notes as part of the structure. In any event, the seller note cannot count as your 10% injection for a partial change of ownership. So you'd need a lender to allow the balance sheet equity to count for your injection assuming the Balance Sheet shows no greater than 9:1 D/W. I can't imagine there are any lenders doing 100% financing? And with less than 1.25 DSC. My question is why? You don't mention the industry. Would hope that for this type of unusually aggressive structure that you have direct industry experience. A conservative reply, yes, and this platform is used to that from me. : ) Wishing you well. redacted

Reply by a lender
from University of Southern California in Los Angeles, CA, USA

Are you looking for a SBA lender that is comfortable with this structure or capital partners (equity investors) comfortable with this structure? I'm a little confused about the deal terms but feel free to reach out for an introductory call here: https://cal.com/ishan-jetley-3d73m8/30min or visit our website: https://gosbaloans.com/business-acquisition/

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