SBA Loan for Manufacturing Business | Debt Consolidation and Expansion Capital

The company had built its debt stack incrementally over several years, adding obligations as equipment needs, facility improvements, and working capital requirements arose. By the time the refinance engagement began, five separate term loans were outstanding across three different lenders, each carrying its own amortization schedule, payment date, maturity, and rate. The combined monthly obligation exceeded $16,000, consuming cash flow that the ownership needed for equipment investment, skilled labor recruitment, and the expansion of CNC service capabilities that their customer base was requesting. The capital structure was functional but inefficient: every dollar going to fragmented debt service was a dollar unavailable for the operational investments that would generate new revenue.

The borrower had attempted to solve the problem through a prior lender engagement that extended for months without reaching commitment. The specifics of why the prior engagement stalled are less important than the result: the borrower reached Cornovus Capital on referral having already invested significant time and energy into a process that produced no outcome. The company needed a capital partner who understood both the SBA program requirements and the credit profile of a precision manufacturing business with aerospace certification, multi-sector customer diversification, and a 60-year operating track record. The underwriting also had to navigate the COVID-19 disruption in the trailing financials. The company's 2020 performance reflected the pandemic's impact on manufacturing order volume, but the three pre-COVID years showed consistent revenue growth and NOI well above the debt service coverage thresholds required under SBA credit standards.

The company's growth trajectory before COVID had been significant: revenue had nearly doubled over a three-year period. But the fragmented debt structure meant the ownership was not able to reinvest the incremental cash flow those revenue gains produced. Equipment leases, short-term notes, and mid-term commercial obligations with compressed maturities created constant refinance pressure and prevented the long-term capital planning that a precision manufacturing operation requires to invest in CNC equipment, maintain aerospace quality certifications, and expand its service offering to meet growing customer demand.

• Five separate obligations across three lenders with varying amortization schedules, maturities, and rates consuming over $16,000 per month in combined debt service
• Prior lender engagement had consumed months without reaching commitment, leaving the borrower without a clear path to resolution
• COVID-19 disruption in trailing financials required the underwriting to present pre-pandemic performance alongside a credible recovery narrative
• Fragmented capital structure prevented reinvestment in CNC equipment, skilled labor, and service line expansion despite growing customer demand
• AS 9100 Rev D certification maintenance and aerospace customer requirements demanded capital investment the current debt structure could not support

Cornovus Capital structured the SBA loan for manufacturing business refinance as a complete capital stack replacement: all five existing obligations retired at a single closing, unrestricted working capital injected for immediate deployment into service line expansion, and closing costs absorbed within the facility so the borrower preserved its existing liquidity. The 25-year fully amortizing term at WSJ Prime plus 2.75% reduced the monthly debt service obligation by approximately 30% compared to the combined payments on the five prior obligations. No equity injection was required under the SBA program terms, preserving the ownership's personal capital position and allowing the full benefit of the refinance to flow directly to the operating business.

The credit package was built around the company's demonstrated performance trajectory. Three consecutive pre-COVID years of revenue growth, culminating in nearly $1.6 million in annual revenue, established the business's earning capacity. Historical debt service coverage ratios of 2.61x, 2.80x, and 3.62x across those years demonstrated that the business consistently generated NOI well in excess of what the new facility's debt service would require. The COVID-year disruption was addressed directly in the underwriting narrative: the company's revenue had contracted approximately 21% during the pandemic period, a moderate decline relative to the broader manufacturing sector, and order volume was already recovering at the time of the engagement. The ownership's 60-year operating history, aerospace quality certification, and diversified customer base across aerospace, medical, automotive, and industrial verticals provided the lender with confidence in the company's durability.

Collateral was structured across both industrial properties with a blanket lien on all business assets, machinery, inventory, and receivables. The combined estimated property value of $1,600,000 provided strong collateral coverage. The SBA guarantee fee, typically one of the largest closing costs on an SBA 7(a) facility, was waived entirely under the federal stimulus program in effect at the time of closing. Cornovus Capital coordinated the SBA authorization, third-party diligence including appraisal, environmental, and title, and managed the payoff coordination across all three existing lenders to execute a clean simultaneous retirement of all five obligations at closing.

• Consolidated five obligations across three lenders into a single 25-year SBA 7(a) facility, reducing monthly debt service by approximately 30%
• Injected unrestricted working capital for immediate deployment into CNC equipment investment and service line expansion
• Presented three consecutive years of pre-COVID revenue growth and DSCR performance ranging from 2.61x to 3.62x to support the refinance underwriting
• No equity injection required, preserving the ownership's personal capital and allowing the full refinance benefit to flow to the operating business
• SBA guarantee fee waived under federal stimulus program, eliminating the borrower's largest closing cost
• Coordinated payoff of all five existing obligations across three separate lenders at a single closing

The SBA loan for manufacturing business refinance closed with all five prior obligations retired simultaneously, unrestricted working capital deployed to the operating business, and a single 25-year institutional facility replacing the entire prior capital stack. The approximately 30% reduction in monthly debt service immediately freed operating cash flow for reinvestment into the CNC service capabilities the company's customers had been requesting. The working capital injection funded the expansion of the company's service portfolio, adding new revenue-generating CNC operations that the ownership had been unable to pursue under the constraints of the prior debt structure.

The transaction moved from engagement to committed terms significantly faster than the borrower's prior months-long experience with another capital source. For a precision manufacturing company with AS 9100 Rev D aerospace certification, multi-sector customer diversification, and a 60-year operating track record, the refinance converted a fragmented, cash-flow-constraining debt structure into a long-term institutional facility designed to support the next phase of the company's growth. The freed cash flow and injected working capital enabled the expansion of CNC laser, waterjet, milling, turning, powder coating, and fabrication services, producing the revenue growth and operating income improvement the ownership had planned but could not execute under the prior capital structure. The company emerged from the refinance with a single monthly obligation sized to its demonstrated cash flow, no equity dilution, and the financial flexibility to invest in the equipment, personnel, and certifications that precision manufacturing customers in the aerospace, medical, and automotive sectors require.

• Five obligations across three lenders retired simultaneously at a single closing
• Monthly debt service reduced approximately 30%, immediately freeing operating cash flow for reinvestment
• 25-year fully amortizing SBA 7(a) facility at WSJ Prime + 2.75% replacing the entire prior capital stack
• Unrestricted working capital deployed to expand CNC service capabilities and add new revenue-generating operations
• SBA guarantee fee waived, reducing total closing costs
• No equity injection required, preserving ownership capital
• Transaction advanced from engagement to commitment significantly faster than the borrower's prior multi-month experience with another capital source
• Expanded service portfolio increased operating cash flow and net operating income post-closing

Additional financing outcomes are available in our Transaction Highlights archive.