Today I had a potential borrower who wanted to buy out the note he had taken back when he bought out his partner 6 years ago. The note amount and financing would end up being approximately $1.2M but after I received more infomation on the deal there was some obsticles.
Here were the challenges of this deal:
- Federal Tax Lien
- Poor credit history
- Minimal collateral
The request of $1,250M called for a refinance of a prior seller carry back note that was greater than the company's book value or cash flow multiple.
Can the problems be mitigated or are there just too many issues in one loan package?
As you probably surmised, this deal was headed for shredder because you can't qualify for the SBA loan program if you have a tax lien. The federal government will not guarantee a loan if you have defaulted on your taxes or on your student loans.
Most lenders will not lend more money than a company is worth as measured by its net worth or earnings multiple.
A banker's credit committee will not entertain a loan with a bankruptcy that has been discharged and now within the past two years the past dues are mounting up again.
However, if you had poor credit but are balanced by outside collateral you may succeed.....and if you have minimal collateral with a good credit history you may succeed....and if you had poor credit and you perservered and paid your debt you may succeed.•
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