EXECUTIVE SUMMARY
During SBA acquisition underwriting, a few long-time customers fell away, forcing two buyers to renegotiate the purchase price before closing. The buyers then stepped in and salvaged those customer relationships before taking ownership. We helped secure a $1.8M SBA 7(a) acquisition and working capital loan while navigating the lost contracts, purchase price changes, and financing adjustments needed to keep the transaction moving.
Two Machinists Saw a Business Worth Buying
This Southeastern precision machining company was now in the hands of the founder’s widow, who really didn’t have any intention of keeping the business.
Two machinists who understood the industry were very interested in it. They really felt like they could make it a thriving business again.
Lost Contracts Changed the Purchase Price
During the underwriting process, a few of the company’s long-time customers had fallen off due to the lack of leadership at the company.
This allowed the buyers to renegotiate the price because income was expected to decrease as those contracts fell away.
The Buyers Acted Before Taking Ownership
These two buyers took it upon themselves to reach out to those customers without even having taken ownership of the company yet. They were able to salvage the relationships so no income would be lost.
This showed the capabilities of these two entrepreneurs and really proved that they were going to do whatever it took to make sure this business was successful.
It had not been in growth mode for a long time. Now it looked like the tide had turned.
Securing the $1.8M SBA 7(a) Acquisition Loan
We were able to help secure a $1.8M SBA 7(a) acquisition and working capital loan for the purchase.
Most importantly, we were able to navigate through the drama of the lost contracts and the subsequent renegotiations of the purchase price.
You have to stay on top of all this when you are quarterbacking the financing of a transaction. Otherwise, things go sideways quickly.
Key Takeaway
Lost contracts and purchase price renegotiations need to be squared away quickly during acquisition underwriting so time does not work against you.
In this deal, the buyers salvaged the customer relationships before taking ownership, and we helped navigate the financing through the changes.
Everyone knows time kills deals. We don’t want that.
Time Kills Deals. Let’s Not Waste It.
FAQ
How can lost customers affect SBA acquisition underwriting?
If customers fall away during SBA acquisition underwriting, the change can affect the financial picture being evaluated for the purchase. In this transaction, several long-time customers left while the deal was being underwritten, which meant expected income could decline. That change became an important factor in renegotiating the purchase price.
Can the purchase price change during SBA acquisition underwriting?
Yes, the purchase price can change while a transaction is still being underwritten if the circumstances surrounding the business change. In this case, the loss of several long-time customers altered expectations for future income, which gave the buyers a reason to renegotiate the purchase price before completing the acquisition.
What happens if business performance changes before an SBA acquisition closes?
Changes that occur before closing may need to be addressed as part of the financing process. Here, customer losses created a new issue after underwriting had already begun. The buyers responded by renegotiating the purchase price and then working to restore the customer relationships before they officially took ownership.
How did the buyers address the lost customer relationships before closing?
The two buyers contacted the affected customers before taking ownership of the precision machining company. They were able to salvage those relationships and prevent the anticipated loss of income. Their actions also demonstrated their ability to step into the business, solve problems, and take responsibility for its future performance.
How did Lendway help keep the acquisition financing on track?
Lendway Capital Advisors helped navigate the financing while the transaction changed during underwriting. That included working through the loss of customers and the resulting purchase price renegotiations while helping secure a $1.8 million SBA 7(a) acquisition and working capital loan for the precision machining company.
Why is it important to address changes quickly during SBA acquisition underwriting?
Acquisition transactions can change while financing is still in process. In this deal, customer losses affected expected income and led to purchase price renegotiations. Addressing those issues quickly helped keep the transaction moving instead of allowing unresolved changes to create additional delays as the buyers worked toward closing.