Executive summary
Generated from the model — review and edit before submission.
Redbud Equipment & Supply, LLC (Redbud Ag Equipment) is a 18-year farm & ranch equipment dealer based in Stillwater, OK (Payne County). The proposed $3,000,000 SBA 7(a) facility funds a business acquisition at a 11.0% note rate, amortizing over 10 years. On trailing revenue of $6,600,000 and adjusted EBITDA of $910,000 (13.8% margin), the base-case projection produces a Year-1 debt-service coverage ratio of 1.51×, with a five-year minimum of 1.51× and an average of 1.74×. Cash flow supports the requested facility against the 1.15× program floor and 1.25× lender target.
Recommend submission. Coverage clears the 1.25× lender target in every projected year, and the business absorbs a 10.7% decline in Year-1 revenue before reaching the 1.15× floor. Under a full lender stress case, coverage holds at 1.20×.
Strengths
- 3 years of consistent top-line growth (6.7% CAGR), from $5,800,000 to $6,600,000.
- Gross margin held at 32.0% with adjusted EBITDA of $910,000 — 3.04× leverage against the requested facility.
- Healthy liquidity: current ratio 3.48× and working capital of $2,060,000.
- Conservative balance sheet: debt-to-equity of 0.56× prior to the proposed facility.
- Coverage strengthens every year, from 1.51× in Year 1 to 1.96× by Year 5.
Risks & mitigants
- Add-backs of $290,000 (31.9% of adjusted EBITDA) require documentation to be credited by the lender.→ Owner compensation is normalized to a $120,000 market salary; the stress case haircuts discretionary add-backs by 35% and coverage still holds at 1.20×.
- Acquisition / management transition risk as ownership changes hands.→ Buyer is the long-tenured current manager, materially reducing transition risk.
- Projected coverage assumes 6.0% Year-1 revenue growth and a stable cost structure.→ Sensitivity shows 10.7% of downside tolerance before the 1.15× floor; the full stress case (growth haircut, cost escalation, owner tax provision) yields 1.20×.
Key terms
- Facility
- $3,000,000
- Program
- SBA 7(a)
- Note rate
- 11.0%
- Amortization
- 10 years
- Monthly P&I
- $41,325.00
- Annual debt service
- $495,900
- Trailing revenue
- $6,600,000
- Adjusted EBITDA
- $910,000
- Leverage
- 3.04× adj. EBITDA