Loans for Additional Acquisitions When You're Max Out on SBA

March 13, 2023

by an investor from University of Wisconsin - Madison in Chicago, IL, USA

Hello,

I've been operating a company for the past 20 months that I acquired using a $5M SBA loan. We've been fortunate to have some decent organic growth, but I'm now looking to grow by making another acquisition. I want to know if there's a feasible path to make this happen and would like to get input from any lenders or operators that have experience with this scenario. Some specific questions I have are:

- Will I need to recapitalize my SBA loan with conventional/mezz debt to proceed in this direction? My understanding is that there are SBA rules that restrict me from taking on additional conventional debt to make another acquisition.

- Is it correct to assume the new lender will need to have guarantees on both the based business and the new acquisition target?

- Can this acquisition be done without having an impact to the preferred shareholders of the base business?

I appreciate any insight or advice you can offer.

Reply by a professional
from Rice University in Jeffersonville, West Norriton, PA 19403, USA

I am a strategic M&A and capital consultant (not a bank nor lender). The folks that have responded can advise on the questions you ask. Perhaps you and I can chat about the vitally important questions you don't ask: 1) How do i prevent the acquisition from pulling my focus from the base business? 2) What are the strategic areas of efficiency and inefficacy that will be the output of the buy? and 3) How do I manage the cultural integration (both internal and external) post acquisition?

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

I would love to have a conversation about options. There is a lot to unpack with this. You can reach me directly at redacted or ping me here.

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