Supportable Valuation for Debt Financing

searcher profile

April 23, 2025

by a searcher in New York, NY, USA

What are the maximum supportable valuation multiples (3x? 4x? 5x?) in the following scenarios? - Initial platform acquisition, with 90% SBA debt + seller note, and 10% equity down - Initial platform acquisition, with 90% SBA debt + pari passu debt + seller note, and 10% equity down - Tuck-in acquisition, fully debt financed with incremental SBA debt - Tuck-in acquisition, fully debt financed with incremental conventional debt (once the SBA $5 million limit has been reached) Assume no maintenance capex
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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
Not sure what you are looking for here. It would help to understand the metrics of what you are buying. It can change quite a bit from deal to deal for what lenders will lend. Also, you mention 90% SBA but then include a seller note and 10% down. How much of a seller note is the seller willing to take? We have funded deals with purchase prices close to $10 million with a $5 million SBA loan and the rest equity and seller carry. We have also done deals with a $10 million purchase price and a $5 million SBA 7A loan and $2 million or more in Pari Passu financing. It all depends on what the deal looks like and what the cash flow can support. When Pari Passu is involved most lenders have much more conservative requirements for debt service coverage ratios then they do for conventional $5 million or less SBA financing. If you would like to discuss in more detail I would be happy to do so. You can reach me here or directly at redacted
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Reply by an intermediary
from The University of Texas at Austin in Dallas, TX, USA
My opinion, and we are doing this across several deals now, you need to refinance it all with private credit and "grow up" to a more institutional market. Happy to help you do so - redacted
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