Hey Everyone!
I'm about to close on my first business. I have a lender commitment letter and all the various appraisals are in, etc. It's a manufacturing/steel plant. I had forensic accounting do DD and an SDE analysis and I should be bringing in about $500k post debt service.
In the larger picture, my plan is buy and roll up end to end manufacturing for the aerospace and defense sector (that I'm familiar with). So I will need to now look at a couple machine shops, and some electronics design and production, in differing LLC's under one C corp umbrella. I have the necessary veteran designators, facility clearance eligibility, and the experience.
I have some partners who are willing to use their SBA eligibility, but I'm also considering raising about $5M in funds (probably debt vs equity) to make the next 2-3 purchases go a bit quicker.
If I already have one purchase under my belt, how much more easy (or difficult) will that make fundraising for me?
How Difficult is it to raise non-SBA funds?
by a searcher from George Mason University
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Most conventional lenders are not going to advance more than the lessor of 50 to 65% or total cost or a 2 to 3x multiple of adjusted EBITDA. So typically the equity requirement is much greater, although you do have more flexibility to use a combination of equity, seller debt, and seller roll-over. You are also looking at typically a shorter term and the requirement for loan covenants. Depending on the deal size a personal guarantee might still be required. Lastly, conventional lenders are more focused on collateral than the SBA is. That does not mean a deal has to be fully collateralized and there are conventional lenders that will lend on cash flow, but that is much more prevalent for larger deals than smaller ones, namely deals less than $10 million and certainly less than $5 million.
Please keep in mind the above are general parameters. Things can vary quite a bit from lender to lender and deal to deal based on sponsor strength, collateral, stability of cash flow, borrower customers, etc.
I would be more than happy to discuss options in more detail and help you structure a plan to be sure you can finance your future acquisitions and will not have any issues securing financing. You can reach me here or directly at --@----.com Good luck with your first closing.