My client had a relatively successful center in a small town. However, it was in run down condition when he bought it and the loan that he used to finance the purchase did not include any money for upgrades. As a result, he had used several short-term loans with high payments to finance the upgrades.
Historic cash flow was non-existent because of the high payments and the proprietor’s credit was low because of high balances on the credit cards he used for upgrades. Property taxes were past due and working capital was near zero.
An SBA loan refinanced all of the debt plus provided working capital to bring the property taxes current and add cash to the balance sheet. The 25-year term on the SBA loan provided a low payment which the center could easily afford.