I am very much in the learning phase of my acquisition journey. I appreciate all the helpful tips and guidance I've received at this site. I had previously posted a question on SBA loans, and many suggested I avoid that route. So now I wonder, what are the alternatives to buying a business with an SBA loan and what are the pros and cons of those alternatives?
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- Debt -
SBA (you know this)
Bank loans (very hard to get)
PE/Hedge Funds - Many of them will lend on spaces they understand, often with a Mezz/Equity component. Size often needs to be significant
Seller Note also called Seller financing.
Mortgage - if Real estate is attached to the deal
Leasebacks - For Hard assets in already in the business.
Equity -
Buy most of the equity and leave previous owner in for a piece (very deal specific)
Silent investors - including family/friends rounds and rolodex. Sometimes preferred return plus equity. Can also due this through warrants, but its more of a debt instrument then.
Institutional investors - If they invest in space, they may be willing to take a minority position. Will come with board seats. Could also be family offices in space.
Other -
Earn-outs. I use as much as possible use this if the cash flow supports it. Its also a helps bridge gaps as sellers always seem to think their business will have upswings in the coming year.