The Situation: Lack of 20% Down Payment to Purchase Real Estate and Consolidate Debt
A husband and wife acquired a Wisconsin manufacturing company in January 2020, just prior to the COVID-19 pandemic in the United States. Business continued reasonably well despite the economic complications. Rather than continue to pay rent, they decided to build up cash on their balance sheet while also buying their real estate.
- Invest In Real Estate
Their location is well suited for the business’s needs, but they were still renting it. Acquiring the real estate allows them to pay themselves rent and build equity in a fixed asset. - Limited Cash on Balance Sheet
The owners used the majority of their cash reserves to buy the business and navigate through the pandemic. This left them with limited cash to make a down payment on the real estate acquisition. - Consolidate Debt & Provide Working Capital
The owners took on multiple loans to acquire the business and buy new machinery and wanted to consolidate them into one loan. They also sought to increase their balance sheet cash position with some additional permanent working capital for continued business growth.
The Solution: 7(a) SBA Blended Amortization Loan From First Business Bank
First Business Bank, an SBA-designated Preferred Lending Partner, provided an SBA 7(a) loan totaling $1,420,000 to help the owners buy their real estate, consolidate all debt, and provide a small amount of permanent working capital.
- Zero Down Payment
To allow the borrowers to preserve cash, First Business Bank financed the real estate acquisition with zero down payment as the business’s cash flow supported the new debt by swapping rent with a mortgage payment. - Dependability
The time put into understanding the business model allowed First Business Bank’s SBA team to deliver a timely approval and structure that matched the borrowers’ request. We provided the financing facility originally proposed and closed on the transaction before a year-end deadline mandated by the sellers. - Functionality
Using an SBA 7(a) loan, First Business Bank offered a blended amortization combining the real estate acquisition with the consolidation of their other existing debt into one simple monthly payment that will save them thousands of dollars each month.