How do you decide on terms for investors in an SBA deal?

by a searcher

2 years ago

Hi everyone, 
If you are doing a deal where you're only needing to raise 5% of outside investor equity, the seller is holding back 5% and the rest is your PG against SBA debt, how do you decide on an investor economics split? I know you have to give them a step up but how much?

To put some #s here, the purchase price + transaction fee is $8m, SBA gives you $5m, seller holds a note for $2m, you raise $600k from investors and the seller holds back $400k on full standby for her "equity". How would you calculate what % you should be giving investors?

3 likes
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4 comments

searcher from INSEAD

Interesting

2 years ago | like reply | 0 likes

intermediary from The University of Chicago - Booth School of Business

Is the investor coming up with 5% of $ 8 M i.e. $400 k and you $200 k for a total of $600 k? Or is the investor coming up with 5% of the $600 k i.e. $30 k, and rest $570 k is yours?

2 years ago | like reply | 0 likes

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