How to Structure a Low or No Money Down Equity Injection Deal on a Business Acquisition

How to Structure a Low or No Money Down Equity Injection Deal on a Business Acquisition

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Hi Beau,

I’m buying a painting contracting company for about $700k. I don’t have the 10 percent needed for the equity injection. What are some creative ways to structure this, Beau?

Thanks for your time!
Ben

In this episode, Ben is seeking advice on structuring a low or no money down equity injection deal for a business acquisition. The business acquisitions often face a collateral shortfall due to the absence of hard assets. While some banks may require collateral like equity in a primary residence or rental properties, it is possible to find lenders who are willing to proceed without full collateralization.

Beau suggests several creative approaches for the equity injection. One option is to negotiate with the seller to leave 5% of their equity in the deal on standby. This means the seller will not receive payments during the loan term, which could be around 10 years, but the interest will accrue. Another possibility is to have a family member provide a gift of 5% equity, as long as the funds are not borrowed. Alternatively, an investor could be brought in, owning less than 20% of the business, to contribute the necessary cash.

It is emphasized that certain requirements must be met, including having a cash-flowing business, good credit, and meeting other lender criteria. While achieving a low or no money down equity injection deal is possible, these factors play a crucial role.

Overall, the Beau provides insights on structuring equity injection deals and encourages interested individuals to schedule a call for further guidance on SBA financing or other types of financing.

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Timestamps:
(00:24) Collateral shortfall and possible collateral options
(00:44) Lenders that will make business acquisitions without being fully collateralized
(00:55) Ways to get creative with equity injection, including the seller leaving 5% of the equity in the deal, a gift from a family member, or bringing in an investor to own part of the business
(01:38) Ways to structure the deal with none of your money but emphasizing the importance of global cash flow and good credit.

💥 Thanks for watching 💥
#Collateralshortfall #equityinjection #collateraloptions

About Beau: Beau Eckstein is a real estate entrepreneur, TV personality, and commercial mortgage advisor, specializing in construction financing and multi-family lending.

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