The 7-Year Collapse of an SBA Acquisition

Oh, rough numbers. I think the purchase price was 3.6 million and roughly 10% of that was a seller. Note, roughly 10% of that was investor equity and the remainder came from an SBA 7A loan. So this happened right when the minimum equity injection for a 7A loan, it went from 20% to 10%.

So I took advantage of it. I don't think that had any sort of material effect on my outcome. I don't know if it would have changed my decision making throughout.

And the. So you said 3.6 million in the preceding year was at 2017. You said yeah, 2017 it was at 1.2. So based on that year it would have been a 3x.

But based on prior, but that was its peaking year. So prior years would have been lower. But let's call it in between.

If you blend the previous three years, somewhere between 3 and 4x is what you paid.

Yeah, yeah, probably 3.5. It was less than 4. I know that.

And you said you had $60,000 to your name. That was for everything from living expenses to search costs to your own equity into the business. So how much equity did you put into the business?

None. In fact, the day we closed I had like $2,000 to my name. I had to immediately. As soon as I had a checking account and we collected some receivables in that first week, I had to stroke a reimbursement check from the business to myself for some of the deal fees that I incurred just to remain above water.

So I finished with zero and I put none of my own money in. And then so there it was. All of the equity came from investors.

And I'm surprised that they let you get away with that. Not. By the way, this has nothing to do with how the story plays out. But in general, in general, investors, myself included, like to see skin in the game. Were those conversations that came up with your investors?

I don't know. I think maybe it was different times. Maybe self funded searches hadn't been as professionalized as they are now. But I had already burned down a lot of the savings and I think that was the logic there was that I already had a lot of skin in the game in the form of pre sweat equity, but I don't know.