The Situation: Acquiring A B2B Digital Marketing Platform For Ear Nose And Throat (ENT) And Other Health Care Practices
The owners of an established Software as a Service (SaaS) business with a niche supporting ENT clinics nationwide wanted to move on to another business venture. An interested buyer emerged with a background in website management and Search Engine Optimization (SEO). They identified this business as a perfect fit to leverage their experience, but they needed acquisition financing. The buyer was introduced to First Business Bank to acquire the business with an SBA loan.
With ties to health care, many of the seller’s business clients were negatively impacted by COVID-19, causing a decline in business cash flow during parts of 2020 and 2021.
The business’s assets primarily were intangible with no collateral to secure the bank loan.
Post-Closing Liquidity & Working Capital
The borrower contributed a large amount of their own personal liquidity as the down payment for the loan, leaving them in a lower post-closing liquidity position.
The Solution: 7(a) SBA Loan From First Business Bank
First Business Bank, an SBA-designated Preferred Lending Partner, provided an SBA 7(a) loan totaling $1,600,000 to acquire the business assets of this SaaS company.
Understanding the Business
First Business Bank’s experienced team took time to learn about the business and discovered that a decline in historical cash flow was caused by clients temporarily closing due to COVID-19. During this time, the seller collaborated with clients to pause required monthly payments, which strengthened their client relationships. The temporary cash flow dip was followed by a performance rebound and numbers now exceed the company’s best years. Asking the right questions allowed First Business Bank to understand the past and get comfortable with that historical performance.
The time First Business Bank dedicated to understanding the business model allowed us to deliver a timely approval and structure per the borrower’s request. We provided the financing facility originally proposed and closed less than 30 days after approval.
Using an SBA 7(a) loan, First Business Bank offered a longer amortization, lower down payment and was comfortable proceeding despite a significant collateral shortfall on the loan due to other strengths of the deal.