Financing a niche business?

searcher profile

August 22, 2024

by a searcher from Duke University - The Fuqua School of Business in Denver, CO, USA

I came across an interesting opportunity, but the broker was hesitant on a deal contingent on bank financing (specifically mentioned SBA). I think it was partly due to this being a service-oriented business in a niche space where banks don't have a background in dealing with this type of company. It's been around for decades and last 5 years have been quite consistent (growing low-single digits) with healthy margins.

Is it more about finding the right SBA bank (SBA + conventional since over $5m) or with these very niche industries, what would be another way? The seller wants something stronger than a preliminary approval (tax records match P&L, the operating structure is quite simple with very little addbacks outside of salary). Rough numbers: price $9M, $1m rollover, $2m equity, so financing the $6m. 5x multiple, DSCR ~1.7x

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
We would love to take a look and it and see if we can provide any assistance. If it is a niche business that Banks may not be familiar with, that does not mean Bank's cannot get educated on it. We have had plenty of opportunities in the past in niche industries and have been able to get lenders comfortable with them. You can reach me here or directly at redacted
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Reply by a searcher
from The University of Michigan in New York, NY, USA
To be clear, the BROKER doesn’t want you to go after SBA loans because they take months and there is no certainty of close. This has nothing to do with the SBA or the lender.

if you need more equity to give the seller comfort you will close, DM me. I’ll participate if it’s attractive.
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