alternative acquisition financing structures
TRANSCRIPT
ALTERNATIVE ACQUISITION FINANCING STRATEGIES
The Bancorp Commercial Lending
IBBA 2021OCTOBER 16, 2021
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Contents
• Meet the Team ................................................................................................................3
• Why Alternative Financing? ............................................................................................5
• SBA Programs & Benefits ...............................................................................................8
• SBA Lending Case Study .............................................................................................12
• Managing Business Acquisition with Rolling Stock (Vehicles) ..................................17
• Acquiring Rolling Stock Through Fleet Leasing .........................................................24
• Questions and Open Discussion .................................................................................30
TODAY’S AGENDA
The Bancorp Commercial Lending
MEET THE TEAM
IBBA 2021
4
LENDING & LEASING SPECIALISTS
Meet the Team
Hetal EngineerDirector, SBL Producing Sales Manager
Stan SalterVP, SBL Business Development Officer
Paul PollockDirector, Leasing Sales
Melissa BeldingAVP, Account Executive Leasing
The Bancorp Commercial Lending
WHY ALTERNATIVE FINANCING?
IBBA 2021
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Why Alternative Financing?
EXPAND FUNDING SOURCE OPTIONS
Alternative financing is how to look at the business for sale and what options there are to get the deal funded.• While SBA loans are an important piece in many
acquisitions, they are only one financing option.
• In today’s market, even smaller deals need to have layered
or structured financing, which can typically include:
• Borrower equity
• Seller financing
• Debt
• Leasing options
• In this presentation, we provide an example of how to
leverage alternative financing strategies when transactions
include vehicles.
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Why Alternative Financing?
When an acquisition includes vehicles in the purchase structure it becomes more complicated.• Even if vehicles make up only a small portion of the
purchase price, it will significantly impact the ability to get
the transaction closed and funded.
• Many lenders don’t want to manage the vehicle title transfer
requirements.
• Today we’re going to focus on how to leverage alternative
financing strategies when vehicles are involved.
MANAGING VEHICLE PURCHASES
The Bancorp Commercial Lending
SBA LOAN PROGRAMS & BENEFITS
IBBA 2021
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SBA Loan Programs & Benefits
SBA LOAN GUARANTY PROGRAMS
7(a) - An all-purpose loan• Loan amounts up to $5 million• Terms up to 10 years; 25 years for owner-occupied
commercial real estate• Wide-ranging use of loan proceeds
504 - Commercial mortgage financing• Loan amounts up to $10 million• Major projects/purchases, including commercial real
estate, heavy equipment and machinery• Long-termfixed-ratefinancing
Express - expedited application process• Maximumloanamount:$350,000(upto$500,000 forExportExpress)
• Revolving line of credit or term loan
There’s an SBA loan for almost any business need.
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SBA Loan Programs & Benefits
WHY USE AN SBA LOAN?
Conventional Loans• Larger down-payment
• Shorter amortization
• Collateral dependent
Private Equity• Structured financing for larger request
• Strict loan covenant
Seller Financing• Bridge the gap between other
financing
SBA• Higher leverage financing – less
money down
• Longer term – lower monthly payment
• Less collateral dependent
What are SBA loan benefits compared to other forms of financing?
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SBA Loan Programs & Benefits
SBA CHARACTERISTICS TO CONSIDER
SBA loans are indispensable to American entrepreneurs and are designed to support qualified, eligible businesses no matter the project, location or industry.
SBA Loan Qualifications:• Demonstrated historical or projected cash flow
• Direct and transferable industry experience
• Principals actively involved in business
• Acceptable personal and business credit scores
• Solid post-closing liquidity
• Owners with greater than 20% ownership stake providing personal guarantee
• U.S. citizen or legal permanent resident alien
• Commercial property must be owner-occupied
The Bancorp Commercial Lending
SBA LENDING CASE STUDY
IBBA 2021
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FINANCING FOR BUSINESS ACQUISITION
SBA Lending Case Study
Business Details:• Acquisition of a water/fire damage restoration franchise
that has been in business since 2004.
• The total price was $2,550,000 to be allocated among
goodwill, equipment, inventory and rolling stock
(vehicles).
• Two SBA 7(a) loans were used to finance the business
and the rolling stock.
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VEHICLE ACQUISITION INVENTORY BREAKDOWN
SBA Lending Case Study
Make Model/Year VIN Mileage Term Buyout/Balance 7/19/2021
Lien Holder Fair Market Value
CHEVY SILVERADO 2019 92841 48 $22,063.47 Lease One Magnolia $
CHEVY CG33903 18' BOX TRUCK 2020 2119 60 $34,667.02 GABC $
CHEVY E25C EXPRESS 2020 45781 60 $28,872.08 GM FINANCIAL $
CHEVY EXPRESS 2019 50041 48 $22,818.54 GM FINANCIAL $
CHEVY EXPRESS 12' BOX TRUCK 2019 27761 60 $34,531.32 GABC $
CHEVY SILVERADO 2020 10685 60 $30,574.59 ALLY $
CHEVY EXPRESS 2020 10495 60 $30,524.02 M&T BANK $
CHEVY SILVERADO 2019 72650 48 $21,440.01 GM FINANCIAL $
CHEVY SILVERADO 2019 75119 48 $23,091.89 GM FINANCIAL $
CHEVY EXPRESS 2020 18899 60 $29,831.76 ALLY $
CHEVY SILVERADO 2634 60 $29,383.83 Huntington National $
CHEVY SILVERADO 2020 61591 60 $28,214.14 Magnolia Bank $
FORD F150 2019 81361 48 $21,117.70 Lease One Magnolia $
CHEVY EXPRESS 2020 13053 60 $47,072.02 ALLY $
CHEVY CG23405 EXPRESS 2020 26827 60 $34,667.02 GABC $
FORD TRANSIT CONNECT NEW 2021 2291 36 $24,760.26 Ford Motor Credit $
FORD TRANSIT CONNECT NEW 2021 1377 36 $24,760.26 Ford Motor Credit $
CHEVY SILVERADO 2019 94344 48 $21,440.01 GM FINANCIAL $
CHEVY EQUINOX 45678 60 $23,025.25 ALLY $
CHEVY SILVERADO 896 60 $36,167.23 BB&T $
CHEVY EXPRESS 2020 21198 60 $31,415.68 M&T Bank $
CHEVY GC3350 12' BOX TRUCK 2019 34040 60 $34,530.46 GABC $
CHEVY SILVERADO 2021 28729 60 $30,302.60 ALLY $
CHEVY EXPRESS 2019 65366 48 $22,740.49 GM FINANCIAL $
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SBA Lending Case Study
Barrier• Business acquisition with a higher level of goodwill and vehicles
included in the purchase price.
Solutions• Longer term financing – 10 years, no balloon
• SBA guaranteed loan due to lack of collateral
• Structure a seamless transition of vehicle ownership
Approval Considerations• Buyer had prior business ownership experience
• Historical cash flow and business performance during COVID-19
• Buyer was flexible to structure as two loans
FINANCING FOR BUSINESS ACQUISITION
SBA 7(a) funding used to purchase the existing business and working capital.
Required equity injection = 20% of total cost
Total Project $2,684,100
Business Acquisition – Intangible, Equipment
$2,265,000
Working Capital $250,000
Closing Costs, Packaging Fee
$19,100
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SBA Lending Case Study
SBA 7(a) funding used to purchase the existing vehicles.
Required equity injection = 10% of total cost
Vehicle Acquisition $ 285,000
Closing Costs, Packaging Fee $ 25,350
Total Project $310,350
Barrier• How to account for vehicle financing in a shorter amortization
to match the useful life of the vehicles.
Solutions• 5-year amortized loan
• Partner with Fleet Leasing team for expertise in vehicle title transfers
• Provide a one-stop solution for the business and vehicle acquisition for buyer and seller
Approval Considerations• Structure the loan to allow for release of vehicles
• Provide a combined 10-year/5-year loan for business/vehicles
• Navigate the title transfer and state-specific requirements with Fleet Leasing representative
FINANCING FOR ROLLING STOCK (VEHICLES)
The Bancorp Commercial Lending
MANAGING BUSINESS ACQUISITION WITH ROLLING STOCK (VEHICLES)
IBBA 2021
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BUSINESS CONSIDERATIONS
Managing Business Acquisition with Rolling Stock (Vehicles)
The tasks involved with this type of acquisition include: • Breaking down the acquisition within goodwill, equipment,
inventory and vehicles
• Allocating the cash injection in the use of proceeds
• Estimating the current value of the vehicles for title transfer
• Potentially dividing the contract to separate the vehicle
purchase
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BUSINESS CONSIDERATIONS
Managing Business Acquisition with Rolling Stock (Vehicles)
What to Look ForWhen brokering a business sale, whether the sale includes an
entire fleet or 1-2 trucks:
• Make sure it’s in your selling memorandum
• Get any info on the vehicles that you can on the front end
including:
• VIN numbers, make/model and mileage where available
• Will they transfer in the transaction?
• Are you paying off other loans/leases?
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SBA LOAN CLOSING PROCESS
Managing Business Acquisition with Rolling Stock (Vehicles)
SBA procedures for acquiring vehicles are labor intensive: • There are many considerations and administrative
requirements to close an SBA loan for rolling inventory.
• The ability to hasten the process depends on how quickly
the buyer and the seller can complete the necessary
paperwork, which may be different during every phase.
• These are three phases to close the loan:
• Preclosing
• Closing
• Post-Closing
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SBA LOAN CLOSING PROCESS
Managing Business Acquisition with Rolling Stock (Vehicles)
PRECLOSING • The SBA Loan for vehicle purchase can include applying
for temporary license plate(s) at your local DMV/tag office.
• Documents needed depend on the paperwork you have on-hand.
• With an executed POA the documents needed are:
• Title
• Proof of insurance
• FEIN
• Pre-SBA closing documents
• Purchase agreement
• Without an executed POA you will need:
• Title
• SBA loan documents
• Proof of insurance
• Purchase agreement
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SBA LOAN CLOSING PROCESS
Managing Business Acquisition with Rolling Stock (Vehicles)
CLOSING 1. Tag & Titles – These documents are typically acquired
during the closing process and require quite a few documents in order to register the vehicle with the DMV.1,2
• Title• POA• Proof of insurance• Bill of sale• Inspections, emissions, weight slip• Loan-closing documents• Temporary license plates if needed
2. Transfer Documentation
• Provide purchase agreement and drafted bill of sale to attorney
• Bill of sale must include vehicles being purchased.• Attorney must draft POA to be signed at closing.
3. Vehicles with Liens:
• Pay existing lender• Secure original title• Confirm lien has been released
1. All tag & title work can take 4-6 weeks to complete upon the receipt of all necessary documentation. 2. All paperwork must include VIN, year, make, model.
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SBA LOAN CLOSING PROCESS
Managing Business Acquisition with Rolling Stock (Vehicles)
POST-CLOSING • During this phase, the borrower must ensure that copies of
the paperwork are provided to the SBA lender.
• If an SBA lien is applied to the vehicles or if there is a lien
and title transfer, an SBA lien must also be applied to the
vehicles purchased.
• There are many additional documentation requirements
and steps required to meet the SBA lender’s post-close
requirements.
However, there is a way to cut down on the time, paperwork
and paid intermediaries involved.
The Bancorp Commercial Lending
ACQUIRING ROLLING STOCK THROUGH FLEET LEASING
IBBA 2021
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FLEET MANAGEMENT/LEASING COMPANY (FMC) ADVANTAGES
Acquiring Rolling Stock Through Fleet Leasing
Working with an FMC can save you time and effort when acquiring vehicles. Their capabilities should include: • Paying-off existing loans or leases
• Handling all of the tag and title transfer work
• Purchasing the vehicles and equipment from the seller
• Obtaining temporary tags for immediate operation of the
vehicles
• Offering fleet management guidance and objective advice
going forward
• Structuring new leases for each vehicle or piece of
equipment to either accelerate payoffs or manage monthly
cash flow
• Offering a line of credit for new and/or replacement
vehicles without needing an SBA or other loan
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FLEET LEASING COST SAVINGS
Acquiring Rolling Stock Through Fleet Leasing
Make Model/Year Mileage Term Buyout/Balance 7/19/2021
Lien Holder Fair Market Value Monthly Payment Term RV New Monthly Payment
Monthly Savings
CHEVY SILVERADO 2019 92,841 48 $22,063.47 Lease One Magnolia $29,400.00 $1,409.47 24 $2,500.00 $879.00 $530.47
CHEVY CG33903 18' BOX TRUCK 2020 2,119 60 $34,667.02 GABC $30,050.00 $809.94 60 $3,500.00 $619.00 $190.94
CHEVY E25C EXPRESS 2020 45,781 60 $28,872.08 GM FINANCIAL $28,475.00 $640.77 48 $3,000.00 $625.00 $15.77
CHEVY EXPRESS 2019 50,041 48 $22,818.54 GM FINANCIAL $24,425.00 $651.23 36 $2,500.00 $629.00 $22.23
CHEVY EXPRESS 12' BOX TRUCK 2019 27,761 60 $34,531.32 GABC $26,125.00 $785.61 48 $3,500.00 $745.00 $40.61
CHEVY SILVERADO 2020 10,685 60 $30,574.59 ALLY $30,425.00 $651.82 60 $3,000.00 $549.00 $102.82
CHEVY EXPRESS 2020 10,495 60 $30,524.02 M&T BANK $30,725.00 $633.42 60 $3,000.00 $549.00 $84.42
CHEVY SILVERADO 2019 72,650 48 $21,440.01 GM FINANCIAL $22,150.00 $729.38 30 $2,500.00 $595.00 $134.38
CHEVY SILVERADO 2019 75,119 48 $23,091.89 GM FINANCIAL $21,900.00 $762.00 30 $2,500.00 $755.00 $7.00
CHEVY EXPRESS 2020 18,899 60 $29,831.76 ALLY $30,275.00 $633.65 60 $2,500.00 $545.00 $88.65
CHEVY SILVERADO 2019 66,223 48 $24,098.86 GM FINANCIAL $22,375.00 $754.17 36 $2,500.00 $669.00 $85.17
CHEVY SILVERADO 2021 11,146 72 $29,009.91 US Bank $30,175.00 $471.70 60 $3,500.00 $509.00 $(37.30)
CHEVY EXPRESS 2019 69,454 48 $20,608.10 Wells Fargo $23,900.00 $826.37 30 $2,000.00 $679.00 $147.37
CHEVY EXPRESS 2020 12,313 60 $31,413.30 M&T BANK $30,725.00 $651.02 60 $3,000.00 $565.00 $86.02
CHEVY EXPRESS 2019 49,443 48 $22,214.34 GM FINANCIAL $24,425.00 $656.02 48 $2,500.00 $475.00 $181.02
CHEVY SILVERADO 1500 2021 3,103 72 $27,981.10 US Bank $31,100.00 $457.89 60 $2,500.00 $499.00 $(41.11)
CHEVY SILVERADO 2,634 60 $29,383.83 Huntington National $31,100.00 $551.29 60 $2,500.00 $535.00 $16.29
CHEVY SILVERADO 2020 61,591 60 $28,214.14 Magnolia Bank $26,750.00 $736.49 48 $2,500.00 $619.00 $117.49
FORD F150 2019 81,361 48 $21,117.70 Lease One Magnolia $25,575.00 $1,433.45 24 $2,000.00 $859.00 $574.45
CHEVY EXPRESS 2020 13,053 60 $47,072.02 ALLY $24,850.00 $978.16 60 $4,500.00 $845.00 $133.16
CHEVY CG23405 EXPRESS 2020 26,827 60 $34,667.02 GABC $29,500.00 $665.01 60 $3,000.00 $629.00 $36.01
FORD TRANSIT CONNECT NEW 2021 2,291 36 $24,760.26 Ford Motor Credit $24,925.00 $554.25 60 $2,500.00 $445.00 $109.25
FORD TRANSIT CONNECT NEW 2021 1,377 36 $24,760.26 Ford Motor Credit $24,925.00 $554.25 60 $2,500.00 $445.00 $109.25
CHEVY SILVERADO 2019 94,344 48 $21,440.01 GM FINANCIAL $21,350.00 $729.38 30 $2,000.00 $709.00 $20.38
CHEVY EQUINOX 45,678 60 $23,025.25 ALLY $18,425.00 $451.93 48 $2,000.00 $499.00 $(47.07)
CHEVY SILVERADO 896 60 $36,167.23 BB&T $31,100.00 $692.50 60 $3,500.00 $649.00 $43.50
CHEVY EXPRESS 2020 21,198 60 $31,415.68 M&T Bank $30,025.00 $651.02 60 $3,000.00 $565.00 $86.02
CHEVY GC3350 12' BOX TRUCK 2019 34,040 60 $34,530.46 GABC $28,850.00 $785.59 60 $3,000.00 $625.00 $160.59
CHEVY SILVERADO 2021 28,729 60 $30,302.60 ALLY $28,475.00 $629.18 60 $3,000.00 $545.00 $84.18
CHEVY EXPRESS 2019 65,366 48 $22,740.49 GM FINANCIAL $45,075.00 $671.56 36 $2,000.00 $639.00 $32.56
TOTALS $843,337.26 $827,575.00 $21,608.52 $15,098.00 $18,494.00 $3,114.52
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THE BENEFITS OF LEASING VS. OWNERSHIP
Acquiring Rolling Stock Through Fleet Leasing
Benefit from end-to-end services
(streamlined fleet administration)
based on your needs
Access to fleet incentives and
discounts
Conserve cash/free capital for
other purposes
Pay for vehicle costs over multiple
budget years
Cycle your fleet faster and reduce
ongoing maintenance costs
Minimize your investment in
depreciating assets
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EXPERIENCE WITH FRANCHISE FLEETS
Acquiring Rolling Stock Through Fleet Leasing
An FMC should also be able to manage franchise requirements for fleets: • Brand-preferred make and model
• System-specific equipment packages
• Brand-approved graphics
• Equipment and graphics costs bundled into lease
• Other franchise-related expenses
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MEETING A VARIETY OF NEEDS
Acquiring Rolling Stock Through Fleet Leasing
The FMC should be able procure any type of vehicle (e.g., SUV, work trucks, vans) and equipment, regardless of make or model.
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QUESTIONS & OPEN DISCUSSION
THANK YOU
REQ0003822 09/2021
Hetal EngineerDirector, SBL Producing Sales Manager
407.758.3926
Stan SalterVP, SBL Business Development Officer
512.504.7416
Paul PollockDirector, Leasing Sales
215.353.2898
Melissa BeldingAVP, Account Executive Leasing
407.253.4449