The Situation: Financing to Acquire Wellness Business And Real Estate
Our client had over 20 years in leadership and management in the nonprofit industry and ran a steam and sauna side business connected to his personal snow skiing passion. During the pandemic, consumers started investing in their homes and outdoor hobbies, fueling demand for upgrades and new steam and sauna equipment and solutions. When he had the opportunity to acquire an established steam and sauna business and real estate, including relationships with its staff, he was excited to start this next chapter of his life. He just had to overcome three main hurdles:
- Limited Equity
The owner collected equity funds from savings and private investors, but it was less than 50% of what was required for a standard business loan.
- Remote Location
The business he wanted to acquire was in a rural area, a substantial distance from the financial industry experts required to assess and approve the deal. As a result, it was difficult to get the attention of lenders interested in taking the time to see his business and understand its nuances.
- Time Sensitive
The labor market was competitive, and the client wanted to maintain trust with the business’s long-term employees. The client wanted to finalize the acquisition without delay and time the acquisition with payroll deadlines.
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 solution with a combined total of $2.562 million for the business, real estate, and operating funds. Benefits of our solution included:
The First Business Bank SBA team leaned on their experience of similar business situations and their entrepreneurial approach, and invested the time required to promptly get to know the business owner and the details of the business he wanted to acquire.
- Improved Cash Flow
By utilizing the SBA 7a program, First Business Bank was able to offer an amortization period for the business acquisition twice as long as what is typically available and an amortization 20% greater for the commercial real estate acquisition.
- Reduced Risk & Increased Flexibility
The SBA loan setup required a lower down payment, an attractive payment deferral option (if necessary), and fixed loan structure that avoids balloons. In addition, no financial performance covenants were required.