Personal balance sheet at time of acquisition
April 06, 2024
by a searcher from University of Texas at Austin in Dallas, TX, USA
Hi, I am in the very early stages of exploring the acquisition of a small business in Texas. To my surprise, I have met resistance from business brokers on 2-3 occasions to even share basic financials due to my personal balance sheet.
My stats:
- 26 years old, married to a teacher
- currently a strategy consultant (still employed, so not FT searcher yet)
- 335k net worth: 185k retirement, 30k brokerage, 60k cash, 60k home equity
I just bought a house which is why my non cash/brokerage accounts are lower but I thought this would be sufficient to at least explore deals with a lender. Given my lower cash position, I’d definitely want to lean on the higher end of DSCR (who wouldn’t though?). My initial plan has been to finance a deal through 80% SBA, 3-5% personal cash, and the rest from investors and/or seller financing depending on seller appetite. Based on this info, and, to my disappointment, a couple brokers have made it seem like it would be impossible for me to get SBA funding for 600k-1m deals they were working on.
Based on this, I appreciate y’all’s perspective on a few questions:
Do I have reasonable expectations?
Should I just wait to really kick off this process after a couple more years of earning and saving?
For former ETAers(?), what was your personal balance sheet like at the time of acquisition? What size of business did you buy? How did you finance it?
Thank you very much!
from Embry in Orlando, FL, USA
from Emory University in Tucson, AZ, USA
Share your acquisition search specification and how it ties to your professional skills. Ask how their bank would approach lending, any concerns they'd have with underwriting, and how they would look at you as a borrower. Have a simple one-pager plus separate PFS for their review and as a leave-behind.
You'll know after your meetings what is realistic, you may refine your search criteria, and you'll have a bench of lenders you can approach for their "read" on an opportunity thus strengthening an LOI when you can also say to the broker, hey, banks x,y,z have positively reviewed the deal and financials. Doesn't guarantee financing, however it increases confidence that you are a serious buyer with the means to close a deal.