Case 3 of 3
Contract packager, one premium account
Difficulty
A contract packaging company running short bottling and labeling runs for beverage brands: $5.8M revenue, $740K SDE, asking $2.4M. The buyer is using an SBA 7(a) loan with about $360K of annual debt service; after a $140K plant manager salary, roughly $600K is left to cover it. The largest customer is 26% of revenue, under the 30% level the lender flags. It pays a premium for fast changeovers and accounts for about $250K of total SDE. It's supply agreement requires written consent to assign on a change of control.
1. Which issue most directly puts the lender's debt service coverage at risk?
2. Does the customer concentration here concern you? Why or why not?
0 / 2000
3. The seller says he'd rather not approach the customer about consent until after closing, for confidentiality reasons. How do you respond?
0 / 2000