Quite new to the smba space, but I am currently in tech doing business analysis consulting and project management.
I have a general understanding of using SBA loans to acquire businesses, but I would love to get more detail on how they’re structured based on business valuations.
Any people and/or resources that can help me get a lower level view on this?
Valuations & Deal Structure
by a searcher from East Carolina University - College of Business
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EBITDA/SDE x Valuation Multiple x 0.9 = Total Possible 7A SBA Loan Amount ($5.0M Max)
EBITDA/SDE x Valuation Multiple x 0.1 = Equity Required (from buyer, seller note, investors)
EBITDA/SDE x Valuation Multiple x 0.05 = Max Equity from Seller Note applical to minimum total equity
EBITDA/SDE / 12 mos loan payments = DSCR, of which, with current interest rates you probably need to target a Valuation Multiple under 4.5x to hit the proper DSCR that most bank have set (can be 1.25 to 1.50 depending on bank).
The Live Oak Bank office hours are a great resource for learing all about this in detail and receiving some valuable modeling tools for more in depth accounting of this!