SBA loan for second acquisition

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by a searcher from Yeshiva University - Sy Syms School of Business
in Boca Raton, FL, USA

1yr ago

SBA loan for second acquisition

Greetings!

I've heard a bunch of people on podcasts (hosts and guests) talk about an "add-on" acquisition (for a business already financed through SBA) being 100% finance-able.

When I've spoken to a couple of actual lenders, including the lender on my first loan, they told me I still need to cover 5-10% percent of the equity. This is with the seller carrying 35% (not specifically structured on stand-by, but I think I'll be able to get the seller to agree to having some of it done this way).

So, anyone with experience in this - how does it really work? How can I get an an add-on 100% financed? Or is it not really possible?

Thank you!

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reply by a lender 1yr ago
from University of Missouri in Denver, CO, USA

Agree with ^redacted‌ and many of the comments above. If the ownership is the same, NAICS is the same, business is stabilized, you should be able to 100% finance if the business can support the leverage. Reach out if you'd like to talk further and move forward with a request.

reply by a searcher 1yr ago
from Yeshiva University in Boca Raton, FL, USA

Thank you! Cashflow should underwrite very well. If it's not the same NAICS code, it's probably because I made a mistake when I started - it's a neighboring territory in the same franchise system.

While I'm providing a bit more info - what is the likelihood for SBA financing for a "business" (i.e. territory) without proper financials? A different neighbor of mine has run his territory along with 2 other territories and a totally separate business - he's having a hard time break out this one's P&L and he's unwilling to share tax returns since it incorporates 2 other territories and another business with 2 or 3 locations.

I heard something about getting a letter from his accountant opining about the health of this particular business. I also would emphasize the purchase price would be less than typical start up costs for a new territory for this particular franchise.