Post-Close Liquidity for SBA Loan

by a searcher from University of Southern California

1 month ago

Hi everyone! I'm working on a deal where the biggest feedback I've gotten from banks is my post-close liquidity isn't enough for them to feel comfortable lending to me even though they like the cash flow of the business. How have you navigated this?

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12 comments

searcher from Hampden-Sydney College

You can always add more working capital to your SBA 7A loan, setup an ABL LOC, or establish a factoring relationship, get a HELOC, etc. The SBA also offers LOCs.

1 month ago | like reply | 0 likes

searcher from Northwestern University - Kellogg School of Management

Consider asking the seller for a bridge note that's paid short-term in the event you meet liquidity covenants. At deal underwriting, liquidity looks good. If things work out the way the seller says, they get paid. If they work out the way banks fear, you don't have a liquidity shortfall. Although banks generally don't like the seller note to mature before their loan, if it's a special carve-out in response to a concern they raised, then you can get it by them. Not sure how SBA underwriting requirements handle this.

1 month ago | like reply | 0 likes

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