Self-Funded Vs Traditional Search
It's really hard to buy a small, cash flowing business!
Eligibility for SBA 7a Loan
American citizens and Green Card holders can access up to $5 million in SBA 7a loan debt, provided they and their business meet various qualifications such as background checks, credit checks, tax returns, and debt service coverage ratio requirements.
Lack of Investors
Historically, there have been no established institutional investors targeting SBA 7a loan-backed buyers of small to medium-sized businesses (SMBs).
Equity Injection Requirement
To secure this loan, applicants need to make a 10% or more equity injection into the business. This equity can come from third-party sources.
Emerging Opportunity
A new opportunity is arising in the market to cater to SBA 7a loan-backed buyers of SMBs, potentially attracting institutional investors to this niche sector.
Traditional Search is not the Answer
The traditional model targets $3M-10M EBITDA businesses, competing directly with Private Equity, without ability to leverage SBA 7a loans. Investors cover 2 years of living expenses for the searcher, with right to fund the target company if/when LOI is secured. This model doesn’t address the Silver Tsunami of SMB retiring owners.
Issues with Traditional Search
Buy a company but the searcher ends up making nothing themselves in the end.
Of searchers who succeed in buying a company fail to cover their otherwise promising opportunity costs as a top MBA.
