Equipment and Receivable Financing for Acquisition

by a searcher from Duke University

1 year ago

Hello, I am looking at an opportunity right now that has a significant amount of equipment ($2.1 million) and accounts receivable ($2.9 million) relative to the business value.  The sellers are open to a significant amount of seller financing such that it would be realistic to acquire the business without SBA. 

What banks would specialize in equipment loans (no personal guarantee) and Line of Credit against receivables that I can reach out to? 

I envision financing the transaction with equity around 10%, seller financing###-###-#### %), equipment loan and a line of credit against receivables in such a way as to avoid a personal guarantee. Is this realistic for a first time acquisition?

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5 comments

professional

You need to guarantee the loans and lines, or banks won't do the deal. Get real! You risk low advance rates and high interest costs by negotiating a no PG loan. Change the mindset, they are your partners and only want a small % of what you borrow for you to make a fortune.

2 months ago | like reply | 0 likes

searcher

Agreed with everything in the above 2 comments. I don't want to say accomplishing this without a personal guarantee is impsosible but in my opinion it's unlikely and could force you into less flexible terms with factoring companies. (If you're required to pay them back upon receiving your receivables will limit how much cash you can keep in the business to cover operating expenses). On the equipment, I have found that if it is not new, you are going to get a much lower valuation than expected (like previous poster said valued against liquidation value vs. replacement value).

My take would be get as much seller financing as possible and then structure youre other financing so that you have liquidity and time to make payments - if the personal guarantee feels too risky then the financing is not structured correctly.

Just my 2 cents.

1 year ago | like reply | 0 likes

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