Alternative ways to Fund M&A Acquisitions in the USA (Outside SBA)

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by a lender from City University London - Cass Business School
in Londres, Reino Unido

1yr ago

Alternative ways to Fund M&A Acquisitions in the USA (Outside SBA)

For USA based Micro-Private Equity & SearchFunds, there is a better way to finance acquisitions and structure deals than just going down the traditional SBA Route.

Don´t get me wrong, the SBA loan facilitates good deal structures to happen, BUT come with a very significant risk. You are essentially Personally Guaranteeing the full Loan amount, with YOUR personal assets. So the legal separation between your personal assets and the business assets/risk, basically evaporates and becomes one.

I started my career, structuring LBOs for the acquisition of SMBs for a family office without having to Personally Guarantee the full loans and by actually creating deal structures that were a win for the bank, a win for the seller and a win for us as a buyer. (putting in as little equity as possible). We grew over 3 years, to more than 100M+ in Revenue.

Through that experience, I learned a lot about how to structure acquisitions via alternative lending and financing options and currently help other Private Equity Firms, Search Funds and Business owners acquire other businesses, access capital for Buy & Builds and also business Refinancing capabilities.

If you would like to know how my team and I have successfully helped more than 300+ deals successfully transact outside SBA loans, I´d love to hear about you and your goals, and how we may be able to assist you.

Please contact me via Email redacted or Linkedin!

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reply by a lender 1yr ago
from City University London in Londres, Reino Unido

It depends on the deal Jason and the balance sheet & EBITDA of the target. But you can do a mix of ABL + Cashflow Loan + Seller Financing. If it has RE in the Balance Sheet, you can also perform a Sale & Leaseback simultaneously with the M&A transaction, as utilise the RE Investors capital as Equity in your sources and uses when presenting to banks. Of course, the Management Team and Buyer, needs to be credible and the better creditworthiness you have, the easier it is to get funding.

A lof of the times, depending on the Balance sheet, you can give a 1st charge over the assets to lenders, and a floating charge over the business on the Senior debt.

I would say that quite a lot of banks will request personal guarantees, but definitely not to the extent of a SBA loan. + the way we run processes gives us a broad chance of negotiating the cost of capital and the PGs.

reply by a searcher 1yr ago
from University of Pennsylvania in Miami, FL, USA

Hi matthew...
I think Jason above makes a great point. when posting in generalities and about "family offices" it is a challenge to understand how this could work and how it applies to searchers - who are very different than family offices. It would be most helpful if you could provide real life examples and actual banks you have used.

Of course ABL, sale/leasback, etc are an option, but cash flow loans - SBA or not require PG at the sub $2/$3M EBITDA level. Even some ABL will require it.

I think also 90% of searcher deals are asset lite so Cash flow loans are the only option.