Funding w/o SBA

searcher profile

January 28, 2025

by a searcher from Georgia Institute of Technology in Atlanta, GA, USA

Hello my Searchfunder friends,

Can anyone give advice on landing funding for the bigger acquisition targets, like in the 8 - 10mil range? Basically looking for guidance on non-SBA funding options...

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commentor profile
Reply by a searcher
from University of Connecticut in West Newbury, MA, USA
Hi Rick - I recently went through a bunch of research on this topic exactly. Unfortunately, the deal stalled, but at least I have good context for the next one. The short answer is you have two primary options as a self-funded searcher. 1) SBA w/ Pari Passu or 2) Conventional Commercial Financing.


SBA is going to want a personal guarantee on their portion and the SBA + Parri Passu lender will likely want it on both. Rates will likely be a bit higher. However, you can leverage up to 90% and sometimes higher depending on the deal and if there is a seller equity roll.

Conventional is likely to have a lower rate, but you will need more skin in the game. I've had several conversations with lenders and the general theme is that getting over 75% leverage is not going to happen for most deals. Most lenders are aiming for 50-60% leverage so you need to come up with a larger equity chunk one way or another.

There are always outliers but this has been my experience so far. Happy to have a call with you to share more info and exchange ideas if you'd like. Hopefully this is helpful.
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Reply by a searcher
from University of Pennsylvania in Seattle, WA, USA
My experience was that up to $10m, SBA was still the best option, even without Pari Passu financing due to the longer term compared to conventional financing. Generally, the conventional financing is capped by DSCR rather than turns of debt due to the shorter term. North of $6m enterprise value, you will generally need to bring more than 10% cash to the table. On a $10m deal a potential structure could be $5m SBA, $2-3m seller financing, $2-3m cash.

Run some quick math on conventional financing to see the challenge. Assuming a 10m deal with 2m EBITDA, your max loan with a 5 year term, 8% rate, and 1.3 DSCR would be under $6.5m and you would need $3.5m in cash to close.
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