Examples of Deal Structures for $1MM-$10MM Companies
April 01, 2022
by a searcher from Brigham Young University in Salem, OR, USA
Does anyone have examples of deal structures of $1MM - $10MM companies they'd be willing to share? I'm curious about how many investors might be ideal, whether or not to use convertible debt, board seats, management fees, percentage of profit bonuses, etc. in order to set the deal up for success. Thanks
from University of Florida in Boynton Beach, FL, USA
In the $6-10mm range a common structure is a "companion loan" which Live Oak markets well but other banks will do. For that, you would max out a $5mm SBA loan over 10 years with another $1-3mm conventional loan that amortizes over 5-7 years. And that would allow you to stick with that 80/10/10 type structure but you might start to need less debt / more equity as you now have a faster amortization and probably a higher EBITDA multiple.
In either case the searcher usually retains majority ownership and control, with investors having basic protections for anything that negatively impacts their position. Investor makeup is usually several individual investors as you need to keep everyone <20% ownership for the SBA. Watch Steve Ressler's presentation on this site for some great info on this.
from Indian Institute of Technology, Delhi in Toronto, ON, Canada