Loans for "seasonal business" going out of season.

professional profile

February 19, 2024

by a professional in Salt Lake City, UT, USA

I am having a little trouble contacting my typical lenders over the three day weekend, but I was curious about loans for seasonal businesses that won't be producing revenue for a few months. I have a client that wants to purchase a commercial snowplowing company. It's a small but stable operation. 400k guaranteed contracted recurring revenue from October-May, netting about half that in SDE, priced at 150k for the contract/business and 220k in optional equipment (client wants some but not all).

The current owner wants to finish out his season, and then sell the business that will not start producing income until October. I want to get the deal locked down, but my client can't afford to make monthly loan payments from now to October without the income from the business. Client has limited liquid funds.

I have never dealt with a situation like this before. I was thinking conventional loan with some kind of halt on the payments until the business produces revenue, but October is far away....

Anyone have experience with this or know of any loan package for a situation like this?

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commentor profile
Reply by a professional
in Salt Lake City, UT, USA
Thanks! I've actually negotiated almost 100% seller financing for this deal and I am going to checkout ZimpleMoney when the terms are final. The owner has virtually no bookkeeping and walked into this business by knowing the right people. The contracts are strong with loyal long term customers, but he has no verification of any of his expenses other than unspecific withdrawals from a checking account. Hopefully we close soon! Thanks for all the replies.
commentor profile
Reply by a searcher
from Pace University in Fort Myers, FL, USA
If the loan comes with a sufficient line of credit for working capital (which should be a non-negotiable), it should carry the operating costs. Of course, your client should rightly ask why they should buy after May instead of October and the seller would ask the same thing, so some kind of compromise would need to be reached there. But I would think a LOC would solve this.
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