Creative structures for deal unfinanceable via the SBA?

by a searcher from Cabrini College

6 months ago

Would love to get some ideas on creative financing structures from the larger group. For context, this deal is unfinanceable via the SBA, but the seller is willing to hold a large note. That said, the seller wants the note to be fully collateralized. Without giving up equity does anyone have ideas around creative financing structures? The seller is open to longer amort terms, rates / structures (assuming we pencil in a balloon payment in 3-5 years), just is not willing to negotiate the collateral position. Appreciate any ideas!

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searcher from Texas A&M University

Love the blank sheet of paper that appears when SBA is out of the picture - I would keep your existing price but take a 20-35% value off and spin into a type of earnout based on company growing at 10, 20, 30% top line or something with end of year bonuses that pay against that part of the note. Then you could also have a part of the value that is only paid off EBITDA - ensuring you make a living before paying back.. There is a reason the SBA wont loan against it - so you have leverage and can make up a simple but creative deal structure.

5 months ago | like reply | 1 like

lender from Eastern Illinois University

If the note is fully collateralized by the company, then it is unlikely you would be able to get outside financing from another lender. Not unless the seller is willing to be in a second position on the business assets to another lender. It sounds like you will need to use equity and the seller note for all of the financing. Hopefully this answers the question you were asking.

6 months ago | like reply | 0 likes

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