What size do banks start to consider cash flow loans?

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November 14, 2024

by a searcher from Irkutsk State University in Seattle, WA, USA

Out of curiosity, does anyone know at what size banks start to consider cash flow loans? I imagine fund pedigree and balance sheet play a role here as well, but have never heard any sort of rule of thumb (aside from ... 'that's too small'). Thanks.

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Reply by a lender
from Baylor University in Houston, TX, USA
Hey Brendan -- Former banker here. Generally speaking for an acquisition term loan, most regional banks would do a cash flow loan on a sub-$3MM EBITDA target IF the deal is fully secured. This implies that the company you're buying is relatively asset-heavy, particularly tangible, longer-term stuff like machinery and equipment, and that these assets are unencumbered by any existing debt. No surprise -- this scenario is pretty rare. However, everything changes if you're targeting a business that is generating north of $5MM in EBITDA. All things considered, a large percentage of banks would be able to underwrite a business of this size based on a combination of unencumbered asset value AND enterprise value. Said differently: banks would be more willing to pull relevant comps that have transacted recently to help establish a baseline enterprise value of your target business. Assuming the banks could find reliable comps, the deal may not need to be fully secured, which means potentially no Personal Guarantee is needed from you. As you might imagine, the moment you look for companies north of $5MM in EBITDA, you should expect much more buy-side competition. There are LOADS more factors than I mentioned but hopefully this helps guide your thinking. Best -- Grant
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Reply by a lender
in Ponte Vedra Beach, FL 32082, USA
^redacted‌ cash flow is looked at at nearly any loan size, There are lenders I work with that specialize in SBA small loan program, I work in standard PLP SBA lending and USDA lending, happy to have a call to discuss in more detail where may be a good fit for what you are searching for. My cell si###-###-#### and email is redacted
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