Non-SBA... Lenders and Rates?

February 23, 2021

by a searcher from Full Sail University in Milwaukee, WI, USA

I'm looking at a majority-partner buyout. The other partner will stay on.

This isn't generally an SBA financeable scenario, so I'm exploring other options for debt. Cash flow is sufficient to cover, and the core of the company is very solid.

EBITDA of the portion to be purchased is just over $1m.

1. Who is lending in this range?
2. What interest rate or terms should I expect with non SBA financing?

16 Likes

39 Replies

659 Views

Replies

Reply by a searcher
from University of Pennsylvania in Chicago, IL, USA

On questions of feasibility of debt financing, the focus should be on security/collateral. If there is valuable collateral to secure the debt, SBA isn't needed and you'll be able to find a lender that will do this. Yes, the minority partner is going to have to agree to take on the debt along with acquiring firm, but that is usually a necessary part of this type of arrangement. Leveraging the target's assets is fair game - not everyone is going to agree to that, but that's often necessary to get a deal across the finish line. Others may disagree, but without good collateral non-SBA debt financing for small business is like a four leaf clover... you might find it, you might not, but will spend a ton a time looking for it ;-)

Reply by an intermediary
from The University of Chicago in Chicago, IL, USA

I have done such transactions as an M&A Intermediary. I will make a bold statement. Partial buyout (majority or minority) with leveraging Target's assets is not possible at all, SBA or non-SBA lender. For starters, banks lend against the assets and/or cash flow. They do not lend against private company shares. If you buy partial shares, how does the debt get on company books? If somehow the bank lends you against the shares, the target has no obligation to pay the interest or the principal on non-company debt, How will you then service the debt? As I said, I have found ways to do such transactions. Happy to help.
I would love to hear opposite view, especially from someone I know and respect, Lisa Forrest.

+37 more replies.

Join the discussion