We bought the real estate as well. So that was able to give us a blended rate and turn on the SBA note, which ultimately brought down our cash outlay every month and improved the debt service coverage ratio some. But ultimately it's a structure that I'd like to use again, honestly.
Acquiring Minds
Buying a Platform with an SBA Loan
Excerpts · 411 segments · ~1:41:45 long
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Unfortunately we'll likely be capped out with or we are capped out rather today with the SBA.
So you use for that 70%. You used almost all of your or all of your 5 million for the.
70% including the real estate. It was trying to think part of that was a. Almost every lender will give you a line of credit for 250 to 500,000.
If you include the line of credit we were close to. Yeah, right around 5 million. The line of credit, the real estate and the business all added up to roughly 5.
And a reminder for the audience what the Blended, the blending that you're talking about there. If you buy real estate with the business, if the business actually, if the business is the total purchase price, if the real estate represents over 50%, so 51% or more than your. The amortization on the SBA loan for the whole package spreads all the way out to 25 years, bringing down your monthly debt…
That's at one extreme and probably in most cases I shouldn't generalize, but not in this case at least. That was not the case. The business, the value of the business was considerably more than the value of the real estate.
And so you didn't get that full 25 year amortization, but you did get some longer amortization than the typical 10 years of an SBA loan. Do you remember what your amortization was?
It's a little over 14 years at prime plus one fixed for five and then floating after that. So buying when we did knock on wood, that in six months at our refinance or second acquisition, we'll be able to stick close to the actual fixed interest rate that we got now that rates have come down by a point and a half or so.
Great. And of course that lower debt payment every month, even the difference between a 10 year AM and a 14 year AM means that you have some significant number of thousands of dollars every year to reinvest in the business.
Absolutely. I think it was more than $5,000 a month that buying the real estate allowed us to keep, which is certainly not insignificant. Effectively. That's the cost of opening a new store and.
Oh wow.
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