Introduction
The IT services sector is booming, with businesses of all sizes relying on managed service providers (MSPs) for critical operations. Financing acquisitions in this space, however, can be challenging due to minimal hard assets and a heavy reliance on recurring contracts. Yaw Capital recently structured an SBA acquisition loan that allowed a first-time buyer to purchase a $3.2M managed IT services firm with confidence.
The Challenge
Our client was an entrepreneur with strong management skills but no prior ownership experience in IT. Traditional lenders were hesitant because:
- The business had few tangible assets.
- Value was concentrated in goodwill and contracts.
- The buyer’s personal liquidity was limited.
Most banks dismissed the deal as “too risky.”
Our Solution
Yaw Capital prequalified the buyer and immediately identified SBA as the best path. We matched the client with an SBA-preferred lender experienced in service-based acquisitions with high goodwill. Our team structured the package to include:
- 10% down payment, with part satisfied through seller financing.
- 10-year term for maximum cash flow flexibility.
- Working capital allocation to ensure smooth transition.
We prepared the financial package with an emphasis on recurring client revenue, long-term contracts, and industry growth forecasts.
The Outcome
The loan was approved and funded in just 62 days. The buyer closed the acquisition with minimal upfront capital and strong post-closing liquidity. Within 12 months, the client expanded service offerings and grew revenue by 18%.
Key Takeaways
- SBA loans work well for service industries with limited collateral.
- Seller financing can reduce equity injection requirements.
- Yaw Capital’s lender relationships speed approvals and close deals others reject.
