The Situation: Medicare Expert Wants To Buy Partner Out of Business
Our client is a Medicare expert who started and grew an Ohio-based Medicare advisory firm as a subsidiary of a larger insurance company. She sought to buy out her partner, the owner of the parent insurance company, who was not involved in the daily business of advising individuals about their Medicare options, such as prescription drug coverage through Medicare Part D.
- Time-Sensitive Funding Issues
Many traditional banks prefer to fund straight-forward acquisitions, but this deal was more challenging and time-sensitive. Our client’s partner granted her right of first refusal to buy the business, with a time limit. As a subsidiary with “carve-out” projection-based revenue, this buyout caused some complications for inexperienced lenders.
- Lack Of Collateral
While it was operating for five years with good cashflow, the Medicare advisory business lacked collateral to qualify for a traditional loan to accomplish the partner buyout. Our client was in a time crunch to find a lender who could fund this non-traditional acquisition.
The Solution: 7(a) SBA Loan From First Business Bank
First Business Bank provided a 7(a) loan totaling $575,000, which included purchasing the business and providing working capital. Our borrower provided a down payment from personal savings and retirement.
An SBA-designated Preferred Lending Partner, First Business Bank’s underwriting and closing team communicated closely with the client to ensure we achieved this acquisition and exceeded expectations.
First Business Bank’s expertise in SBA Lending afforded us the opportunity to work with the SBA directly and helped us to structure an acceptable loan that satisfied the partner, our client, and the SBA.
This partner buyout with a lack of collateral was a great fit for the SBA 7(a) program, which also provided working capital to ensure the continued success of the business.