A client was looking to purchase an established retail and postal agency business for $395,000, using a combination of their own funds and finance from Line Capital.
The business had a stable trading history, with annual revenue of around $480,000 and consistent reported earnings over the previous two years.
With the buyer contributing a substantial portion of the purchase price themselves, the focus was on arranging finance for the balance and ensuring the business could support the repayments.
The client had agreed to purchase the retail and postal agency business for $395,000 and was putting together the funding needed to complete the acquisition.
Unlike some business purchases, there was no vendor finance involved. The buyer was contributing their own funds towards the purchase, with Line Capital being approached to finance approximately half the purchase price.
The business itself had been trading consistently. Revenue had increased slightly from $480,000 to $485,000 between FY24 and FY25, while reported EBITDA remained at approximately $100,000.
The main consideration was whether those earnings would provide enough capacity to meet the repayments on the acquisition lending, alongside the other financial commitments associated with the business.
The business’s stable trading history provided a useful starting point for the assessment.
Revenue had remained relatively consistent over the previous two years, while reported EBITDA margins were around 20%, indicating that the business had maintained its profitability despite a slight reduction in gross profit.
For the lending assessment, Line Capital used a more conservative EBITDA figure of approximately $80,000 to assess the business’s ability to service the proposed debt.
Based on annual debt commitments of approximately $60,000, the projected debt service coverage ratio was around 1.3x, meeting Line Capital’s minimum policy requirement.
That left limited headroom above the servicing threshold, so the buyer’s financial contribution and the proposed security arrangements were important parts of the overall assessment.
The facility was approved subject to confirmation of the buyer’s contribution towards the purchase and the final settlement payment.
Line Capital provided a $195,000 secured AcquisitionLine over five years, supported by a first-ranking GSA over the acquiring entity and a caveat over property.
The business recorded revenue of $480,000 in FY24 and $485,000 in FY25, demonstrating a consistent level of trading across the two years.
Reported EBITDA remained at approximately $100,000, while the EBITDA margin increased slightly from 20% to 21%. Gross profit reduced from $170,000 to $160,000 over the same period.
For servicing purposes, EBITDA was assessed at approximately $80,000, representing a margin of around 17%.
With proposed annual debt commitments of approximately $60,000, the projected DSCR was approximately 1.3x, in line with Line Capital’s 1.30x policy threshold.
The assessment supported the proposed lending, with approval conditional on confirmation that the buyer’s contribution and final settlement arrangements were in place.
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