Lending/financing options for a potential deal (non-SBA?)
May 12, 2023
by a searcher from The University of Chicago - Booth School of Business in Chicago, IL, USA
I'm looking at a niche fitness equipment company (pre-LOI). They're coming off of extensive supply chain issues that started before the pandemic, and so the recent financial history is choppy (they also didn't benefit from the pandemic-related surge in sales since they simply didn't have product). However, the company has been around for decades with success prior to the supply chain issues (products are patented), and they are now consistently getting inventory and have a relationship with a large contract manufacturer. I think there's potential here as they have a strong reputation with organizations in the niche they are in, and I see a number of opportunities to expand the addressable market through marketing/branding.
They've been consistently getting product in and filling orders for about 10 months now, so there's nearly a year's worth of usable financial history. SDE over that period is something like $450k. The seller has health problems and is looking to exit quickly. Given the fact pattern here, I believe I could do something like 25% equity with a 401k rollover, but I'm not sure of what to do for the rest (roughly $1mm). I'm guessing SBA lending is unlikely given the limited usable financial history (please let me know if I'm wrong). Any suggestions for non-SBA lenders that might look at something like this (recognizing that the economic/rate environment isn't ideal) would be appreciated, My understanding is that the 401k rollover format makes it very difficult to include other equity investors for a variety of reasons (again, please correct me if I'm wrong), which is why I'm focused more on debt, although I recognize that the facts here may otherwise lend themselves to an equity-like solution.
from University of Southern California in Las Vegas, NV, USA
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA