I am working on a deal involving a Covid hit business - Lender/Investor opportunity?

November 07, 2020

by a searcher from Pepperdine University - Graziadio School of Business and Management in Boise, ID, USA

I am working on a deal that has seen a 35% reduction in 2020 revenue, due to Covid (B2B customers include airlines, casinos, restaurants). Pre-Covid###-###-#### ), revenue remained steady (~$4 mill) with profit increasing 30-40% YOY during that period, and 2019 SDE breaching $1 million.

Seller is willing to carry a substantial amount of purchase price###-###-#### %) and it is priced at a low multiple. Pre-covid, this deal would have been a slam dunk.

Is there an appetite for this type of deal from a SBA/conventional/private investor?

Reply by an intermediary
from Indiana University at Bloomington in Carmel, IN, USA

I have some banks that are willing to look and fund on 2019 numbers, IF the last few months are showing improvement or are back to 2019 run rate. Usually requires a erosion clause (putting some money into a seller note or in escrow) so that if###-###-#### and can go longer) does not get backup to 2019 numbers, then the seller note erodes. This is how most SBA loans are getting done now with either Covid dips or bubbles. The erosion clause has to be worded correctly or it may not be SBA compliant. Reach out if you need to talk about it. redacted

Reply by a lender
from University of Missouri in St. Louis, MO, USA

Does the TTM still work under that structure? If so you can still get it done. redacted The drop in financial performance can be mitigated if the structure reflects the current performance of the business.

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