I'm looking at a $16M revenue / $2M EBITDA medical device distributor with $5.5M in inventory. The inventory consists of both new products and refurbished products (which the company refurbishes themselves and then resells at a high margin). The business is very stable but has no revenue growth. The inventory is required to run the business and cannot be significantly reduced.
Question 1: I'm looking for advice how to use the inventory as collateral for an acquisition loan. Does anybody have a list of lenders who will lend on the inventory assets (without a personal guarantee)? What is a good ballpark estimate for the amount of debt financing I might get on $5.5M of inventory and what are typical interest rates?
Question 2: How would you value a business like this? It it running at $2M EBITDA but has flat revenues over the past 5 years and $5.5M in inventory.
Appreciate your thoughts!
List of lenders who make inventory loans
by an investor from University of California, Berkeley - Haas School of Business
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On debt, few lenders will lend on inventory alone. I know some who will, but they tend to be very expensive. Instead, lenders will look to A/R or cash flows first, then use inventory as a secondary measure. For example, I know several lenders who will lend up to 60-65% of inventory value, but this amount is also capped at 50% of the lending based on A/R (so unless your A/R is huge, you never actually get up to 60-65% of inventory).
To get more specific and/or to suggest lenders I'd need to know some more details. Feel free to email me directly - --@----.com