CASE STUDY: No Lending Collateral

 Cornerstone’s Challenge: No Collateral

Our client was a high-rise window cleaning company based in central Wisconsin. Known for its ability to handle complicated structures and high-profile projects, the company services marquee accounts such as Lambeau Field, the Kohl Center, and the Wisconsin state capitol.

In 2009, after more than 35 years of operation, its owners engaged Cornerstone Business Services to find a buyer. Like most service businesses, this Company didn’t have much in the way of collateral. Despite strong financial performance, the company’s tangible assets amounted to little more than a handful of vans, ropes and squeegees. To compound the problem, lending was at a standstill as the country’s financial crisis was coming to a head. Even the SBA had capped low collateral loans.

The challenge wasn’t finding a buyer—we had 11 offers in 60 days—it was finding the financial resources to close the deal.

Our Approach: Sell It, Then Sell It Again

  1. Establish expectations. The size of the offer is meaningless if the buyer can’t secure lender support. The lending climate what it was, we knew the deal would involve significant seller financing. We provided an estimate of value (including anticipated deal structure) before engagement, ensuring the sellers wouldn’t face an unexpected surprise.
  2. Persuade lenders. Once the seller selected a buyer from the 11 interested parties, we focused on reselling the deal to potential lenders. The buyer was shocked when its national banking partner of more than 50 years declined to support the acquisition. We used our relationships to connect them with a Madison-based institution that understood the strength of the deal.
  3. Assist with SBA financing. Cornerstone helped shepherd a special loan request to SBA headquarters in Sacramento. The SBA saw the value and agreed to loan five times the funding cap—one of only 79 such waivers in the country.

Results: Strategic Networking Relationships Succeed

The buyer was able to finance the purchase through a collaborative agreement that included seller financing, traditional lending, and an SBA loan. Among the contracted payments was a one-year seller earn out—which the buyer received at the maximum potential value.