Seeking Advice on Financing for a Specific Deal

searcher profile

January 23, 2025

by a searcher from Augustana College in Madison, WI, USA

Hi everyone,

I’m currently evaluating a specific deal. I know the owner personally and essentially have the first right of refusal. The business generates $1MM in SDE, and I’m trying to determine the best way to structure the financing.

I don’t have the multiple six figures it would take to purchase this business through SBA, but I’ll be damned if I don’t figure out how to make this happen. I may not have an MBA, but I’m determined to find a win/win situation for myself and the seller, as well as the right path to structure this deal and create a positive impact for my family and community.

I’ve read and been given varying answers to the questions below, so I wanted to tap into the collective wisdom of this community:

  1. 1) Equity Injection: Is it possible to raise the 10% equity injection from investors? (I’ve heard it’s not preferred but not necessarily a “no.” If so, where have you had success finding these investors?)
  1. 4) Equity Injection Requirements with Industry Experience: If I am able to purchase a 20%+ equity stake in the business, can I purchase the remaining ownership later without needing additional money down? What is the timeline for this, if so?
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commentor profile
Reply by a lender
from University of Southern California in Los Angeles, CA, USA
1) Equity Injection: Is it possible to raise the 10% equity injection from investors? (I’ve heard it’s not preferred but not necessarily a “no.” If so, where have you had success finding these investors?) - Yes, but a PFS will be requested by SBA lenders and they will prefer skin in the game. If you only have 2.5% then they will want 7.5% from investors. If you have less, chances of funding go down but still possible. 2) Asset-Based Lending for Equity Injection: The business is heavy equipment asset-heavy, can I use an asset-based loan to fund the SBA equity injection? - No needs to be equity. 3) Seller’s Note as Equity Injection: I’ve heard of deals where a seller’s note covers the equity injection requirement. Is this accurate, and under what conditions is it typically allowed? - Yes allowed if the seller note is subordinated to the SBA loan and is put in full or partial standby for the first two years, fully amortizing with no balloon payment. 4) Equity Injection Requirements with Industry Experience: If I am able to purchase a 20%+ equity stake in the business, can I purchase the remaining ownership later without needing additional money down? What is the timeline for this, if so? - Are you referring to the 0% down partner buy out? It’s most likely going to be 2 years.
commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
I would be happy to have a discussion and see if we can provide any assistance. We are a Commercial Loan Brokerage Shop with over 500 direct funding partners. We also provide free deal analysis and pre-approvals. You can reach me here or directly at redacted
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