SBA Automotive Dealership Loan | Multi-Location Acquisition

The dealership enterprise being acquired operated two distinct business lines: a retail auto sales operation across three physical locations and a captive consumer finance company that had built a loan portfolio of more than $5 million in consumer auto receivables. Under SBA SOP, a lending or finance company's loan portfolio cannot be financed through an SBA 7(a) facility. The consumer AR had to come entirely from the borrower's own equity. That single SOP restriction shaped the entire capital structure of the transaction.

With $1,699,672 required in equity to fund the finance company side, the buyer's capital was substantially committed before the SBA structure was even built. On the SBA side, real estate across all three locations totaled approximately $1 million against a total project cost of $6.27 million. That ratio was insufficient to blend the amortization schedule toward the longer terms that real estate-heavy transactions can access. The result was a 10-year fully amortizing loan, which produces a monthly debt service obligation significantly higher than what a 20 or 25-year structure on the same balance would require.

The core credit challenge was not the quality of the business or the capability of the operator. It was demonstrating, with documentation sufficient to withstand lender credit review, that the dealership operations could sustain 10-year debt service without the contribution of the finance company portfolio that SBA SOP had excluded from the analysis. Every assumption in the credit package had to be grounded in the dealership business alone.

• SBA SOP restrictions on financing companies prohibited the captive consumer auto loan portfolio from inclusion in the SBA structure, requiring $1,699,672 in borrower equity (27.1% of total project) to fund what the SBA could not
• Insufficient real estate relative to total project cost prevented blended amortization, forcing a 10-year fully amortizing term with materially higher monthly debt service
• The credit case had to be built on the dealership operations analyzed independently from the consumer finance company, even though both were part of the enterprise being acquired
• Three separate locations required appraisals, environmental assessments, and collateral coordination across all sites
• Business valuation and financial analysis had to account for the SOP exclusion and model the business at tighter coverage ratios than a longer-term structure would have required

Cornovus Capital built the credit package around what the SBA structure could include and developed the analysis to make that case as complete and defensible as possible. The engagement began with a working feasibility study and financial model constructed specifically around the dealership retail operations, analyzed as a standalone business independent of the consumer finance portfolio. That separation was not a limitation to work around. It was the analytical boundary the SBA SOP required, and the credit submission had to honor it precisely while still giving the lender confidence in the total enterprise.

The market analysis covered the competitive set across the three-location operating footprint, demand conditions in the relevant market, and the revenue capacity of the dealership under projected operations. Financial modeling was built to demonstrate debt service coverage at the 10-year amortization profile: what the business would generate, what it would require to service the loan, and where the margins sat under conservative assumptions. The goal was to give the lender's credit committee a model they could stress-test and still approve.

The equity injection and SOP exclusion were documented and structured into the sources-and-uses in a way that was transparent, compliant, and clearly explained in the narrative. The consumer finance company side was addressed in the feasibility analysis as context for the overall enterprise, with the SBA-eligible components isolated and underwritten to the standard the program requires. Third-party diligence across all three locations was coordinated concurrently: appraisals, environmental assessments, and the independent business valuation required under the SBA structure.

• Developed a working feasibility study and financial model analyzing the dealership operations as a standalone business, structurally separated from the consumer finance portfolio per SBA SOP requirements
• Built debt service coverage analysis at the 10-year amortization profile to demonstrate the business could sustain the higher monthly obligation without the finance company contribution
• Produced market analysis and competitive set review covering the three-location operating footprint and projected revenue capacity
• Structured the equity injection and SOP exclusion into a transparent, compliant sources-and-uses that supported rather than complicated the credit narrative
• Coordinated concurrent third-party diligence across all three locations: appraisals, environmental assessments, and independent business valuation
• Delivered a SBA automotive dealership loan credit submission that addressed every structural complexity before the lender's credit committee encountered it

The $4,571,000 SBA 7(a) automotive dealership loan closed with 72.9% SBA financing and a $1,699,672 borrower equity injection, structured on a 10-year fully amortizing term at Prime plus 2.75%. The full enterprise was acquired across all three locations: real estate, inventory, trade accounts receivable, and the operating business assets eligible for SBA financing. The consumer finance company portfolio was funded through borrower equity outside the SBA structure per SOP requirements, consistent with the credit package that had been built to address that exclusion from the outset.

The buyer entered ownership with a clean capital structure, an institutional credit package on record, and all three locations operational. The transaction demonstrated that SBA SOP constraints on financing company assets, when properly identified and structured around early in the engagement, do not prevent a transaction from closing. They define the analytical work required to get it there.

• $4,571,000 SBA 7(a) facility closed on a 10-year fully amortizing structure at Prime plus 2.75%
• 72.9% SBA financing with $1,699,672 borrower equity injection (27.1% of total project cost)
• Full three-location enterprise acquired: real estate, inventory, trade AR, and operating business assets
• Consumer finance company AR portfolio funded through borrower equity, excluded from SBA structure per SOP requirements
• Working feasibility study and financial model documented the dealership's debt service capacity at 10-year amortization, independent of the excluded finance company
• Third-party diligence coordinated across all three locations through closing

Additional financing outcomes are available in our Transaction Highlights archive.