How to finance the acquisition of a recently started company?

investor profile

February 11, 2021

by an investor from Carnegie Mellon University - Tepper School of Business in Philadelphia, PA, USA

I am interested in acquiring a company that was started in 2019 and in 2020 earned $1M revenue at 50% net margins and they operate within a rapidly growing segment. However, the SBA lender with whom I usually work (Live Oak) has no interest in offering debt for this deal as the company is too young--they would like to see 2018 revenue that would cover the debt service--and my experience is that other SBA lenders have similar preferences. But maybe I'm wrong.

Has anyone made a successful acquisition of a young company that involved raising debt financing? I'd appreciate hearing your suggestions on what lenders are willing to lend against young company revenue.

Thanks!

0
5
143
Replies
5
commentor profile
Reply by a lender
from Western Carolina University in Raleigh, NC, USA
One year of cash flow with minimal collateral is not a problem for us. I have financed many in the past, and currently working on 2 right now involving companies started in 2018/2019. It really comes down to how aggressive a lender wants to be and how strong the entire deal is. It is also understandable why a lender would want 3+ years of operating history for credit risks.
commentor profile
Reply by a lender
from California State University, Sacramento in Auburn, CA, USA
At Plumas Bank, we consider all eligible SBA loan transactions including newer company business acquisition requests (and the occasional startup - assuming adequate real estate collateral). However, as a CA based community bank, we only lend in CA, OR, WA, NV, and AZ (not nationally). Please contact me if this deal fits our lending region - redacted
commentor profile
+3 more replies.
Join the discussion