Transfer or renew equipment loans?

searcher profile

February 01, 2022

by a searcher from The University of Texas at Austin - Red McCombs School of Business in Dallas, TX, USA

If you want to purchase a company in an asset deal, but they have equipment with existing financing at an attractive price, can you structure to keep the financing? Or does it have to be paid off and refinanced after close?

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commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
I agree with Adam Huber.Most loans do not allow the Borrower to assign them to a new entity.Also, many smaller commercial loans also have a personal guarantee.You would need the existing lender to cooperate, and likely that would require them to re-document the loans.They are unlikely to do that if they are not providing the debt financing as the risk in the deal is going to be higher if you are leveraging the deal with other acquisition debt.Hopefully this makes sense. If you wish to discuss I can be reached at redacted
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Reply by an intermediary
from Ryerson University in Toronto, ON, Canada
Coming from a lender's perspective, transferring the existing loans is difficult. It interferes with your acquisition financing structure, the only way I have seen it done before is in a non-SBA financed deal where a buyer went to the seller's existing bank and took out the acquisition loan alongside the existing financing which was refinanced. It saved the vendor some prepayment penalties but the process was long. Probably not the best fit for you.
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