The Situation: Management-Led Acquisition Of Product-Supply Company With SBA 7(a) Loan
After a successful career of more than 20 years in management and sales, our client had the opportunity to purchase the products/equipment supply business where he was general manager for the past few years. However, he would also need to buy its sister company — a consulting firm in the same industry — as the two companies were up for sale together. Given the COVID-19 pandemic adversely impacted many businesses, many traditional lenders remain averse to financing business acquisitions that are not fully collateralized.
- Change of Ownership Financing Risk
Business loan requests to finance a change of ownership are inherently risky since leaders previously responsible for the business’ success are no longer part of the operations. The SBA guaranty on a portion of the loan helps to decrease the lender’s risk.
- Collateral Shortfall
The lending package was secured by equipment, inventory, and accounts receivable because there was no commercial real estate in this loan request.
- Working Capital
Working capital to cover operating expenses for the first few months of new ownership was an additional need identified that clients sometimes don’t anticipate.
The Solution: $2.79mm SBA 7(a) Loan From First Business Bank
First Business Bank, an SBA-designated Preferred Lending Partner, provided an SBA 7(a) loan totaling $2,790,000, which included funds to acquire the businesses, closing costs, and working capital for operations.
First Business Bank’s SBA Lending team worked closely with the client and the seller to achieve a rewarding end-result. The client’s dream of owning a business is now reality!
First Business Bank’s SBA Lending team guided the client through the loan process and provided the financing facility in accordance with the timeline desired by the client and seller.
Using the SBA 7(a) program, First Business Bank’s loan facility was the right loan for this client, allowing him to acquire this business he had been managing for years.