There Are Over Sixty Attributes Required To Be Quantified and Qualified To Assess The Value Of A Small Business (<$5M).

Loan Structure:

• Equity Injection %

• Seller Carry Back %

• Seller Carry Back Amortization (# of Months)

These Attributes Will Impact Selling Price By Up To 25%

A Small Sample Of The More Obvious Areas Where Value Is Impacted By The Deal And Funding Structure.

Four variables impact the value of a small manufacturer with $400k in Adjusted EBITDA.

1. Prime Interest Rate:
Since 2000, Prime has affected the debt ceiling lenders can extend to this business by $375,197 (e.g., from 3/2017 to 12/2018, Prime increased from 3.75% to 5.50%, resulting in a $114,000 decrease in the debt ceiling).

2. Buyer’s Credit Score:
There is a $112,000 variance in the debt ceiling based on the buyer’s credit quality.

3. SBA Underwriting Guidelines (at time of closing):
As of 1/2018, the SBA made a significant change in its guidelines. In optimal circumstances, this change could increase the business’s selling price by more than $400,000.

4. SBA Guaranty Fees (paid at closing or rolled into the note):
When a buyer rolls these fees into the note, the seller will receive $34,570 less at closing.

One must always have a firm grip on this elusive and obscure “debt ceiling” number.

Piercing this ceiling will not prompt the lender to request an adjustment. They will reject the loan, and the SBA will not permit another loan application for 3 months.

Miscalculate the deal or loan structure, pierce the debt ceiling, and the deal is lost.