Financing Scenario
Custom Contractor Business Case Study
Buyer acquired an existing custom contractor of high-end kitchen cabinets. The business had been established 20 years ago by the founder who was now retiring. This transaction was a stock sale.
Purchase Price $3,950,000
Loan Structure
- Purchase Price $3,950,000
- SBA Fees/Costs $217,250
- Working Capital $100,000
- Total Project Cost $4,267,250
- Seller Note $395,000 (10% of Purchase Price)
- Buyer Equity $426,745 (15% of the Total Project Price)
- SBA 7a Loan $3,445,525
Seller Note Terms
The seller note had a term of 10 years with zero payments of principle or interest for the first 24 months.
Loan Terms
- Term 10 Years
- Amortization 10 Years
- Estimate Payment $38,000 (approximate – based on Wall Street Journal Prime Rate + 2.75% (SBA Maximum)
Personal Credit
- Average Credit Score 779
Additional Collateral Pledged
- Buyer did not pledge any additional collateral for the loan as had already sold their primary residence. However, they did have a very strong cash position of approximately $2M.
Total Cost
Remember your total out of pocket costs will be higher than those costs estimated within the SBA loan as they vary by transaction. Additional costs to consider:
- Life Insurance Policy
- Business Insurance Policy
- Title/Transfer tax on vehicles included in the sale
- Attorney costs
- Relocation costs
