Hi Guys, I'm New Here. Can You Cash-Out Refi A Business Like Real Estate?

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01/11/2021 Redacted Redacted

searcher University of North Texas

HI GUYS, I'M NEW HERE. CAN YOU CASH-OUT REFI A BUSINESS LIKE REAL ESTATE?

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searcher University of Notre Dame Indiana University South Bend - Judd Leighton School of Business and Economics - 01/11/2021

You could certainly try. I'd imagine what you would be trying to do is to lever up the business and then distribute the cash. Depending on the lender's risk tolerance and the business's balance sheet I suppose anything is possible, although I would guess it would be more difficult than in RE.

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searcher University of North Texas - 01/12/2021

Yes i think so too; Thanks for the input

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searcher - 01/12/2021

Private equity firms do it all the time. Its typically called "recapitalization". Problem is that most conventional banks are unlikely to lend you money to do that - you will likely have to go to direct lenders and other alternative debt capital providers

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searcher Sonoma State University - 01/12/2021

Depends on what the business does. You could get loans on monthly revenue ,inventory, etc to raise capital

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searcher Harvard University - Harvard Business School University of Oklahoma United States Air Force Academy - 01/13/2021

A regular bank is most likely to say yes to that if the money is for expansion, but you should have a shot if it's to "buy out an investor" or something like that as long as the DSC won't go too high.

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searcher Georgetown University - The McDonough School of Business Purdue University - 01/13/2021

Most investors in businesses of this size don't like cashing out ownership, unless it's for retirement and there is a succession plan in place. Agree with Mike and they will be more excited to lend or invest if the money is to be used to expansion. You'd likely get a higher valuation as well.

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searcher University of Pennsylvania - The Wharton School - 01/13/2021

Absolutely - often subordinated debt is used for transactions like this but hinges upon size of the enterprise. That type of debt can be used regardless of hard asset value. Hard assets with equity value can always be turned into cash via senior type debt. Just like real estate, the lender will require a margin of safety - i.e. if equity value is X then the loan will be some percentage of X.

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