It’s late August and I get a call from a partner in a daycare in Houston, TX. They were partnering up with two other families to acquire a well established daycare in a community nearby. They had been working with another lender for a few weeks at that point, but weren‘t happy with the response time they were getting (it had been over a week since they had heard from the loan officer). The borrower started explaining his project and it sounded like the perfect scenario for an SBA 7(a) loan. They already own a daycare nearby, all of the partners have excellent credit, there's plenty of liquid capital available, everything an SBA lender would want to hear. Honestly, it sounded like a boring transaction to me at that point. I like the hard-to-get-done deals. Then they tell me what the rate the original bank had quoted, and I knew it was nothing we could match. I let him know I'd be willing to try and keep the deal moving forward, but I wouldn't promise anything.
We proceeded to collect a package and get to work. The group started out responsive, but ultimately needed much more hand holding and coaching along the way. The files they sent over were a mess, missing information, not complete. Now it's getting fun. And now I know why they hadn't heard back from the other lender yet. When banks get nice clean packages that are easy to review, they can move quickly and efficiently. When a deal seems like it's going to take more effort than it's worth, it gets pushed to the back burner. This was a group of 6 (three married couples) with the wives all being partners in the daycare, and the husbands having demanding careers. With these guys qualifications, I felt certain the original lender would have gotten this done.. at some point.
It didn't take long for us to get everything in order, and present the deal to our lender. It took a little time to get the lender and borrower to agree on terms, but we ultimately landed at an agreeable spot (not quite as good as the original lender, but still a good rate for the loan type). And now we're off to underwriting. While the group was sophisticated, they really needed help with their business planning and projections. I certainly could have sent a template and told them the requirements, but I have been doing this long enough to know I would have been waiting forever. So, I dove in. I worked up a solid working business plan and had the group fill in the blanks where needed. I was able to help them think through certain aspects of the transition they hadn't thought of yet, and they were able to put on paper some of their thoughts they didn't share yet. Although they were purchasing an established business, SBA requires the plan along with detailed projections and assumptions due to the fact there will be a change in the ownership structure.
This was all during the flood of SBA 7(a) loan requests coming through in September. Most every lender across the country was overwhelmed and overworked. Underwriting and closing departments were backlogged, and there wasn't much you could do to get things moving any faster. We ultimately got them approved (with the SBA incentives available at the time) and headed towards closing. Because of the backlog at the bank, it took much longer than expected to have a closing agent assigned to the deal. Because of sbaloansHQ extensive knowledge of the SBA process, we didn't let that stop us. We went ahead and put out a preliminary closing checklist to get the group started in the right direction. By the time the lender assigned their closer, most everything was already in the works (barring a few headache items that always seem to pop up).
Would this group been able to purchase this daycare facility without sbaloanHQ's help? Most likely. Would it have been a lot more headache on the lender and the borrower's parts? We think so.
