Financing Scenario
Tree Trimming Business Case Study
Buyer acquired an existing Tree Service Business. The company was acquired by the current owner from the founder in 2010. The company specialized in residential tree service and tree removal services. This transaction was an asset sale.
Purchase Price $2,100,000
Loan Structure
- Purchase Price $2,100,000
- SBA Fees/Costs $115,500
- Working Capital $150,000
- Total Project Cost $2,365,500
- Seller Note $210,000 (10% of Purchase Price)
- Buyer Equity $355,000 (15% of the Total Project Price)
- SBA 7a Loan $1,800,500
Seller Note Terms
the seller note had a term of 5 years with zero payments of principle or interest for the first 12 months. Typically, an SBA lender will want to see 7-10 year term on the seller note. In this case, the cash flow from the business was strong enough to support a shorter repayment term of 5 years. The 12 months of no payments was included to provide buyer time to build up cash flow before beginning to make the payments on the seller note.
Loan Terms
- Term 10 Years
- Amortization 10 Years
- Estimate Payment $2,000 (approximate – based on Wall Street Journal Prime Rate + 2.75% (SBA Maximum)
Personal Credit
- Average Credit Score 800
Additional Collateral Pledged
- Buyer pledged primary residence as collateral for the loan.
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
