Options for cashflow financing outside of SBA

April 13, 2020

by a searcher from University of Arkansas at Fayetteville in Memphis, TN, USA

I am interested and searching in the SLP, OT, PT clinic space. This space is very asset light but has good cash flow. So, what are my options for financing outside of the SBA? I would like to pursue the options that allow for deal flexibility and in particular LBO based practices.

Also, is there a particular deal size that I should be looking into to perform an LBO?

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Reply by an intermediary
from Boise State University in 800 W Main St, Boise, ID 83702, USA

Your options are: Seller financing or perhaps Private loans from wealthy individuals. What is the size of the transaction? What are the revenues and earnings of the business? How is your personal credit? What type of other collateral do you have available to pledge? (Obviously, these questions are for your consideration and not to answer here on this forum). The reason lenders use the SBA program is to shore up the lack of collateral, and to reduce the risk of financing an acquisition for a new owner using more debt than equity. SBA lenders know that the majority of business acquisitions fail within 2 years but having the SBA guarantee provides them some comfort to make the loan. In the current economic environment, lenders will become even more risk averse. (I'm an ex commercial/SBA lender and this is my opinion). Hope this helps.

Reply by a searcher
from Columbia University in Los Angeles, CA, USA

Most non-SBA lenders that will do smaller deals still seem to have a minimum of $2mm of EBITDA so I'd suggest starting there. Plenty of cash flow lenders out there for financings above $2mm

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