Fundraising options for businesses with diversity affiliation

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by a professional from University of Virginia-Darden - Darden School of Business
in Charlottesville, VA, USA

3yrs ago

Fundraising options for businesses with diversity affiliation

Interested in learning more about options to raise capital for an acquisition where the selling business is one of the following (not exhaustive list):

- Veteran-owned
- Woman-owned
- Minority-owned

And they have contracts that are predicated on that affiliation. I myself am a veteran but am sure other searchers out there have run into this problem with other opportunities, especially in the government contracting world.

I've run into this situation now a few times:

Great business that is veteran-owned and has contracts that are dependent on the company maintaining the veteran-owned status (defined as 51%+ ownership by a veteran or group of veterans) and so they need to sell to a veteran. I've come across some targets that would be a $20 mm+ purchase price and so the $5 mm limit on an SBA loan wouldn't be enough for a single searcher to acquire the business and maintain the 51% ownership requirement.

Options I can think of:
- Non-SBA lenders, which doesn't sound great in this interest rate environment
- Pooling a group of investors who meet the criteria (in this case, veterans)

Curious if anyone else has come across this dilemma and seen creative ways to make it happen.

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reply by a professional 3yrs ago
from Villanova University in West Chester, PA, USA

Yes, great observation and idea! ^redactedThere are a number of ways this is structured on the legal side. I detailed a few below. ‌

reply by an investor 3yrs ago
from United States Naval Academy in Colleyville, TX 76034, USA

Sent you a DM to connect on this one for the vet space, but I think there are more vectors than just "contracts based on" that might come into play with one of these vectors. I'm putting some thought on this one as we speak.