How Justus Luttig bought $1.5M of earnings without an SBA loan
Buying a business without an SBA loan is hard, but Justus Luttig closed two HVAC and plumbing companies generating $1.5 million in EBITDA at a 5x multiple, with no bank debt at all. Here is how he financed it, what blocked the usual path, and what a first-time buyer can learn.
Short answer: Justus could not use SBA financing because he held an H-1B visa, and no bank would lend against an asset-light, seasonal cash flow business. He raised equity instead, anchored by a trusted long-time contact, and the round was oversubscribed by close.
EBITDA = earnings before interest, taxes, depreciation, and amortization. It is the core profit measure buyers price a deal against. Here, the multiple was 5x EBITDA, so the implied enterprise value was about $7.5 million.
What business did Justus Luttig buy?
Justus acquired two complementary companies in Dallas, Texas: Copeland, a three-year-old HVAC business, and First American Plumbing, founded in 2017. Combined, they produced $8 million in revenue and $1.5 million in EBITDA with a team of just under 30 people.
Copeland was the larger of the two. The two firms were already working together, sharing jobs and overlapping customers, which made the combined operation easier to run as one.
A few facts to anchor the deal:
- Revenue: $8 million combined across both companies
- EBITDA: $1.5 million, priced at a 5x multiple
- Headcount: just under 30 people
- Structure: no SBA loan, no bank debt, equity-funded with seller rollover
Justus is a South African former venture capitalist. He left a VC role in San Francisco after learning that real operating businesses looked nothing like the startups he had funded.
Why couldn't he use an SBA loan?
He could not use an SBA loan because of his visa status and the deal's risk profile. Justus held an H-1B work visa, not citizenship or a green card. New rules had also tightened SBA lending to exclude green card holders entirely, so the one tool built for a deal this size was simply off the table for him.
The business profile made conventional lending hard too. Here is why this matters for any buyer in a similar spot.
| Capital source | Why it failed |
|---|---|
| SBA loan | His H-1B visa disqualified him; new rules also excluded green card holders |
| Regional banks | No hard assets to collateralize; seasonal, non-recurring cash flow seen as too risky |
| Large banks | $8M revenue too small to justify their underwriting cost |
| Credit funds and family offices | Available, but priced at over 20% all-in |
The deal had no property, no real estate, and no vehicles owned outright. For a company that size, tangible collateral was thin, and that detail became critical when financing time arrived.
How was the deal financed?
The deal was financed with equity rather than debt, after every debt path closed. The only lenders willing to engage were credit funds and family offices, and they priced accordingly: interest rates in the high teens, PIK (payment-in-kind) interest that accrued rather than being paid in cash, and warrants that diluted the whole cap table.
PIK interest = interest that piles onto the loan balance instead of being paid in cash. Warrants give a lender the right to buy equity later, which dilutes existing owners. All-in, that debt cost more than 20 percent a year once warrant dilution was counted.
That cost reshaped the structure. Justus had planned to layer in debt so the two sellers could roll over roughly 30 percent of the purchase price as equity while keeping his own dilution manageable. With debt this expensive, he had to raise more equity, not less.
If you are weighing debt against equity in your own search, this breakdown on interest rates when buying a business is a useful companion read.
How did the deal come together?
The deal arrived almost by accident. For two years Justus worked as CEO at Stows Independent Services, a 40-year-old HVAC and plumbing operation, under an arrangement to eventually buy it from the owner. That deal collapsed in April 2023 when rising interest rates and valuation disagreements made it untenable. On his birthday, the plan he had left San Francisco for died.
Soon after, a searcher who had also failed to close a Copeland deal mentioned over coffee that the seller might still entertain another buyer. Justus asked for an introduction. That conversation kicked off a four-month diligence and fundraising push.
What did he check in due diligence?
Justus ran due diligence with the operating rigor he built during two years at Stows. He did not trust historical financials or surface-level revenue claims. Instead, he benchmarked Copeland and First American against the business he had just left.
His due diligence covered:
- Operations: the work order system, technician utilization rates, and job dispatch efficiency
- Revenue quality: whether income was recurring or purely seasonal
- People: interviews with every technician and manager, plus site visits
- Customers: direct conversations and a look at customer concentration
- Records: three years of tax returns, bank statements, and accountant-prepared statements
- Owner dependency: how involved the owner was in daily operations
HVAC and plumbing firms live or die on recurring maintenance contracts and service agreements, not one-off jobs. Both companies had some recurring work, but the bulk of revenue came from non-recurring, highly seasonal emergency calls and installations.
His goal was not to poke holes. It was to learn whether the growth was real or just a rising tide lifting a hot Dallas market. For more on this discipline, see the most expensive mistake business buyers make.
What surprised him?
The surprise was not in the business. It was in the capital market. Justus assumed debt would be available because it is nondilutive and lets sellers keep skin in the game. Instead, no one would lend to him, and the cost of the capital that was available rewrote his entire plan.
Regional banks passed immediately on the asset-light, seasonal cash flow profile. Large banks saw $8 million in revenue as too small to bother with. The SBA, the natural home for a deal this size, was closed to him on visa grounds.
The one takeaway
The deal that looked impossible worked because Justus had built trust over two years in an industry he had only recently entered. His first investor was a South African ex-pat he had known for over a decade. That anchor investor's credibility in private equity and operations circles gave other investors permission to follow. By close, the round was oversubscribed.
The broader lesson is harder to stomach: financing for small business acquisitions is fracturing. SBA lending was never perfect, but it solved for something the market now avoids, namely small, asset-light, seasonal cash flow businesses. Without it, a buyer like Justus had to assemble capital from sources that demanded equity and wrapped it in punishing terms.
For buyers searching now, the math has changed. You cannot assume debt will be there. You cannot assume traditional banks will move fast, or at all. Know your network, prove your thesis with real operational data, and be ready to give up more equity than you planned to keep control and alignment. A first-time buyer's $20M acquisition shows another route through the same problem.
What to check in the Google review history before buying
Before you sign, study the review history trend, not just the current star rating. The signal buyers consistently overlook is whether complaint volume has been accelerating in the months before the listing went live.
A business rated 4.2 stars two years ago and now at 3.8 stars with accelerating complaints is a different asset than one sitting steady at 3.8. The first is sliding; the second is stable. For a service business that runs on repeat work and word of mouth, that trend can move the real value of the deal. You can run a fast pre-purchase review check to surface it before diligence even starts.
Frequently Asked Questions
Can you buy a business without an SBA loan?
Yes. Justus Luttig bought two companies worth $1.5 million in EBITDA with no SBA loan and no bank debt at all. He funded the deal with equity from investors plus seller rollover. It is harder and usually more dilutive, but it is possible when you have a trusted network and proven operating data.
Why was Justus disqualified from SBA financing?
He held an H-1B work visa rather than U.S. citizenship or a green card. SBA loans require eligible ownership, and new rules had tightened lending to exclude green card holders too. The instrument best suited to his deal size and profile was simply unavailable to him.
What multiple did the HVAC and plumbing deal sell for?
The two businesses sold at a 5x EBITDA multiple. Combined EBITDA was $1.5 million on $8 million of revenue, which implies an enterprise value of about $7.5 million. The sellers also rolled over roughly 30 percent of the purchase price as equity.
Why wouldn't banks lend on this deal?
The company was asset-light, with no real estate, no property, and no vehicles owned outright to use as collateral. Its cash flow was seasonal and largely non-recurring, which regional banks judged too risky. Large banks saw the $8 million revenue as too small to justify their underwriting cost.
Verdict
Buying a business without an SBA loan is doable, but it shifts the burden from debt to equity and from collateral to trust. Justus closed a $1.5 million EBITDA deal at 5x by proving his thesis with real operating data and anchoring his raise with a long-time contact. The financing market is tightening for small, seasonal, asset-light businesses, so plan to give up more equity than you expect.
One signal buyers keep missing is the review trend, the slope of complaints before a listing goes live, not just the headline star rating. Run a Reputation Audit at velaworks.io before you sign.