SBA Deal Structuring 101 - a $2M EBITDA ecommerce business - Acquisitions Anonymous 246
Nov 17, 2023
The hosts discuss challenges of financing a $2-3M EBITDA business through SBA loans. They explore inventory pricing, saleability, and deal structuring based on turnover. They highlight the importance of understanding working capital and lenders' caution. They also discuss the benefits of using a broker and the challenges of dealing with seasonal businesses.
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insights INSIGHT
The SBA Financing No Man's Land
Businesses with EBITDA between $2M and $3M fall into a "no man's land" for financing.
SBA loans max out below this range and private equity is interested in larger EBITDA, leaving limited buyer options.
volunteer_activism ADVICE
Close With Line of Credit
Always try to close deals with a line of credit if the business is seasonal or needs working capital.
It's nearly impossible to add a line of credit after closing due to lender restrictions.
question_answer ANECDOTE
Borrower Lessons on Line of Credit
A borrower resisted taking a line of credit to avoid fees but ended up needing it shortly after closing.
This proved the lender's advice to always include a line of credit was correct.
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In this episode of Acquisitions Anonymous, Bill and Heather analyze a nine-year-old Amazon FBA brand listed by Quiet Light Brokerage, emphasizing the challenges of securing SBA financing for businesses in the $2-3 million EBITDA range. They highlight the complexities of working capital management, especially for seasonal businesses with perishable inventory, and raise concerns about the misleading nature of pricing deals with including inventory. The episode offers valuable insights into the nuances of e-commerce business valuation and financing.
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