Construction business deal collapsing due to bank failings

October 22, 2024

by a searcher in St. Petersburg, FL, USA

I have a signed APA and in due diligence on a small construction company (price $750K, Cashflow $300K+) The company has been in business 28 years and all members of the team will remain after sale (2 office, 4 crew). The seller will remain for 4 weeks. No GC license is required. No new construction and city contracts.

After approving the deal and providing the term sheet, the bank are now asking for a co-signer. Apparently the bank's credit guy is being difficult as they have a huge backlog of deals.

What are my options other than shopping this deal to other banks and delaying the closing?

Posting anonymously to protect the deal and bank. DMs welcome.

0 Likes

29 Replies

226 Views

Replies

Reply by an intermediary
from Arizona State University in Houston, TX, USA

I know taking it to another bank at this point is your least ideal option. I would suggest to keep the deal on track, is request the Seller to sign for the personal guarantee. Have a side consulting or employment agreement in place to compensate the seller for this risk. Yo could also guarantee the seller that within 3.5 years you refinance the loan and take them off as the guarantee. Another way to structure it, keep the seller on as a minority equity partner, less than 18%. This might waive the need for a cosigner. You would need to negotiate now what the structure of the buyout would be in 3 plus years, i.e. multiple of sde or ebitda you would use to value the buyout in the future. Last option, have one of the team members personally guarantee the loan and compensate them for said risk as a bonus (or bring them in as a minority equity partner. Hope these ideas help.

Reply by a searcher
from Colorado State University in Centennial, CO, USA

^redacted‌ tagged me so I will chime in. I ultimately agree with ^redacted‌ that this is a BS move on the banks part and you don't want to be in bed with them. However, if the seller and deal itself don't allow time needed to get it done elsewhere, I like the options ^redacted‌ put forth. If your seller is reasonable, give them the choice and they should be willing to help you figure it out instead of starting over with someone else. Is the lender a nationally known player? DM me if you want to talk further.

+27 more replies.

Join the discussion