Our borrower had been a portfolio manager for a construction lender for decades. He was technically in the construction field and had a very impressive resume. He finally wanted to move on to actually owning a service company within the construction sector. The company had many profitable commercial contracts and was growing at an extremely quick pace.

Now, because of the fact that it was growing so quickly, the multiple it was selling for was only supported by one tax year. Most lenders want to see multiple years of financial performance in order to feel comfortable making a loan. This wasn’t the case here.

However, we saw the potential, much like our borrower did, and felt comfortable moving forward with the business acquisition. We also knew our borrower was very capable of running this business.

About a month after we closed on the acquisition, the borrower came back to us because he needed a line of credit (LOC) to cover the bonding requirements necessary to execute the commercial contracts already in place. We were able to help provide this, even though it was immediately after closing.

This is a common challenge when securing a line of credit after a business acquisition, especially for construction companies that require bonding and upfront working capital to execute commercial contracts.

This is another problem with many lenders. They are often unwilling to lend additional capital to a company they have just financed through an acquisition. Instead, they prefer to see time elapse and performance reports from the new owner before considering another loan.

If that had been the case here, it would have put a stranglehold on the expansion of this company. They would not have been able to fulfill profitable contracts that were already awarded. That raises an important question: is that good business, and does it actually make sense?

Why Lenders Reject Lines of Credit After an Acquisition

• Many lenders require multiple years of post-acquisition performance before extending additional credit
• Construction businesses often need immediate liquidity for bonding and commercial contracts
• SBA loans allow flexibility, but lender risk tolerance determines whether growth continues or stalls

When lenders delay post-acquisition financing, it can restrict expansion and prevent otherwise profitable contracts from being executed.

When dealing with SBA loans or acquisition financing, it is critical to work with advisors or lenders who can make decisions without allowing fear to dictate outcomes. In acquisition financing, the difference often comes down to whether lenders focus on historical comfort or forward-looking cash flow and execution.