Financing - Collateral requirement question

Member resources:

Frequent asked questions:

What is Searchfunder.com?

Searchfunder.com is an online community of searchers, investors, lenders, brokers and other professionals. Over 80% of those involved in searchfunds maintain a Searchfunder account to help them network, hire, and mentor others.

What are the benefits of membership?

In addition to accessing the most active online network of business buyers, Searchfunder licenses research that is simply not cost effective for individuals. Access over 15,000 industry reports and 50,000 transaction financials. You also get monthly credits for contact information for your company sourcing campaign with the option to purchase more at drastically discounted rates. Searchfunder has pre-purchased access from these data providers in order to empower individual buyers and to help searchers level the playing field versus private equity.

Do you have deals?

While we are primarily a buy-side network, we do have hundreds of brokers that regularly post deals to the community.

Can I find an internship on Searchfunder?

Absolutely! We have the industry's largest intern job board. If you are considering a search, the first step is to help another business buyer so you can hit the ground running.

What does it cost?

Searchfunder is a subscription service. We offer flexible monthly, annual and lifetime memberships.

Monthly

$79 / month

Annual

$19 / month

Lifetime

$432 / once

Those who maintain an account with us for over 4 continuous years are permanently added to the community without the need for a membership.

Do I need an MBA to join?

While a large number of our members come from dedicated programs at Harvard Business School, Stanford GSB, Chicago Booth, and other top programs, searching is no longer reserved for the elite. With the current abundance of dry powder in private equity, and an increasing number of business owners reaching retirement age, good deals rarely go unfunded.

Post a question, deal, job, etc...

Make a post...

Complete registration to post.

by a searcher from University of Maryland Baltimore County
in Los Angeles, CA, USA

2yrs ago

Financing - Collateral requirement question

I have a very basic question. Any help will be greatly appreciated.

I am planning to purchase a 1.5MM business (Manufacturing industry). As I speak with banks, I have found out that they are typically requiring about 15-30% down payment (rather than 10% which we see online) and also they require collateral (about 1 to 1.5X of the loan amount). The bank told me that collateral requirement is typical for someone like me who is a first time buyer of a small business.

I can potentially self fund about 15% of down payment but the collateral requirement is something that I just wont be able to do if I want to self fund.

Would love some guidance in terms of how I should think about it. Have anyone had experience with this? Does this mean that I need to expand by financial options beyond traditional banks?

0 Likes

280 Views

reply by a lender 2yrs ago
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Ammar, what type of structure are you looking at. If you are trying to do a conventional bank loan, then you are correct most lenders will want to be fully secured by hard business assets and are likely to require a significant down payment. If you are looking to do an SBA 7A loan, then you should be able to get away with as little as 10% down. Now the SBA does require outside collateral if you have any, but even if you do not have sufficient collateral to fully support the loan, they would just take what you have and still do the loan. We do loans all of the time with heavy goodwill value, even when pretty much the whole purchase price is backed by goodwill value. If you do not have outside assets to pledge (which is most often taken in the form of a second or third mortgage on a residence of other wholly owned investment properties where you have 25% or more equity), they will still make the loan. I would be more than happy to discuss your options in more detail. You can reach me at any time at redacted Thank you and have a great day!

reply by a professional 2yrs ago
from American University in Irvine, CA, USA

Ammar: Your situation may be well-suited for a traditional Leveraged Buyout, or LBO, where a bank will lend a buyer the funds to purchase a business, and use the target company's assets and properties to help collateralize the loan. We have represented clients in many of these structured acquisitions. If you would like to speak further about this technique, please feel free to contact me.