Lending Solutions for an Acquisition Platform

searcher profile

June 27, 2024

by a searcher from University of Virginia-Darden - Darden School of Business in Walla Walla, WA 99362, USA

I'm attempting an acquisition strategy that's slightly different than traditional search where my intention is not to run the business full-time, but rather lean in on financial management and strategy heavily investing 20-30% of my time enabling me to acquire 3-4 businesses instead of one. This creates some restrictions on the debt side of the cap structure as traditional SBA lenders may shy away from the concept. Also, my intention would be to largely buy platforms and build the businesses through acquisition. So, two questions:
1) Are there particular lenders known to this community that would better align to my strategy?
2) Are there particular lenders / structures that are aligned to having a senior loan that can be "expanded" as additional acquisitions are added to the platform?

Thanks!

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commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
Great questions. I think the biggest challenge you are going to have on the front end is that a lender is not going to approve you for a loan that is open-ended like a line of credit until they get some experience with you and see you successfully operate a company. So I think you will have to get your first acquisition under your belt. Once you do that and have some experience, there are more options that will open up to fund the acquisition of additional businesses.

As for your strategy to buy multiple businesses and maybe bring operators in, that is not an uncommon strategy and there have been plenty of other acquirers who have done so. You could certainly look to use more conventional financing, but that financing is going to be much more restrictive then SBA financing. If you are doing your first acquisition and are bringing in someone to help run the business but it will be the only business you have, you can definitely still use SBA financing so long as you intend to be involved in the business. Doing the first deal or two with SBA financing maybe easier and the financing terms are likely to be better for you (less money down, longer amortization, no financial covenants, etc.). But eventually if you plan to grow beyond the $5 million SBA limit you will eventually need to pivot to more traditional financing.

I would be happy to discuss options in more detail at any time. You can reach me here or directly at redacted Good luck with your search.
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