For Lending Institutions
Earning Lenders Confidence
Secure your collateral with operational-level early warning systems that stop risk before it impacts your financials.
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The "Friday at 3 PM vs. Tuesday Morning" Scenario
The Status Quo
The Disease: Stage 4
"Right now, in a traditional ESOP transition, how do you find out that a company is in trouble? You get a phone call on a Friday at 3:00 PM. The CEO tells you they are going to miss Monday's debt service payment."
Why? Because you find out their CFO left 90 days ago, the accounting department has been flying blind, and cash flow has seized up. By the time you get that phone call, the damage is catastrophic. You aren't managing a transition; you are managing a crisis, and the loan is headed straight to the workout group.
The Forhemit Reality
The Early Diagnosis
"With Forhemit's 24-month stewardship, that Friday afternoon call never happens. Instead, you get an update from us on a Tuesday morning, 48 hours after that CFO resigns."
But it's not a panic call; it's a status report. We tell you: "The CFO has departed. Per the COOP playbook we built prior to closing, the cross-trained Controller has already stepped in as interim CFO. The books are stable, a search firm was engaged yesterday, and there is zero threat to your debt service."
The Bottom Line: The Cure
A fundamental principle holds true across business, medicine, and life: early engagement with a problem preserves the greatest number of solutions. Most lending models are reactive, triggered only when the event has impacted the balance sheet — this is frequently months after the cause.
Forhemit engages at the operational level; we provide that critical advantage of an early warning system. We help you handle the situation at Stage One with easy to manage adjustments, rather than being forced to consider limited, high-stakes options at Stage Four.
The Lender's Challenge: Vulnerability in Transition
SBA portfolio data consistently highlights a critical vulnerability: early defaults in acquisition financing are rarely caused by a flawed business model. They are driven by execution missteps, leadership vacuums, and sudden operational disruptions following a founder's exit.
Rapid Activation
When the unexpected strikes during a transition, the business needs more than a financial model; it needs a tested operational playbook. We ensure backup systems activate within hours.
Seamless Operations
Critical vendors are notified through pre-established channels, and invoicing continues uninterrupted. The business keeps running even when leadership changes.
Uninterrupted Debt Service
Cash flow is protected, the system absorbs the shock, and the monthly payment is made on schedule. Your collateral remains secure throughout the transition.
Our Approach
Disaster-Tested Continuity of Operations (COOP)
At Forhemit, we treat business transitions with the same rigorous preparation required for crisis management.
Drawing on over a decade of experience leading disaster preparedness and response for the City and County of San Francisco, we apply specialized disciplines to protect your collateral.
Operational Continuity
We engineer operational continuity—not just financial restructuring
Structured Playbooks
Pre-built operational frameworks for seamless transitions
Risk Mitigation
Proactive protection ensuring your credit memo remains accurate
Uncompromising SBA Compliance
SOP 50 10 8 & Beyond
Full Regulatory Alignment
We recognize the shifting regulatory landscape and proactively structure every transaction to meet the most rigorous SBA eligibility and compliance mandates, ensuring a smooth path through LGPC submission.
1. Strict Eligibility & Citizenship Audits
We conduct comprehensive citizenship and residency audits of all ESOP beneficiaries to ensure absolute compliance with Policy Notice 5000-876441. 100% Verification: We certify that all participants are U.S. Citizens or Nationals whose principal residence is in the U.S.
2. ESOP Trust & ERISA Standards
The ESOP trust acquires 100% equity, easily satisfying the 51% requirement. All packages include an ERISA-compliant valuation report from an independent appraiser (Procedural Notice 5000-872764) and legal opinions confirming trust compliance.
3. Transparent SBA Agent Governance
We operate with absolute clarity regarding governance, strictly adhering to SBA Agent guidelines (SOP 50 10 7.1). We serve as specialized transition consultants for a strict 90-day post-close period—the borrower's independent management team retains exclusive operational control.
Fee Transparency
All compensation is a fixed, non-contingent advisory fee, fully disclosed on SBA Form 159. We provide no guarantees or keepwells; the borrower's creditworthiness is assessed on a standalone basis.
Post-Close Observability
The 90-Day Early Warning System
01
DSCR Trajectory Drop
When the Debt Service Coverage Ratio drops below 1.25x trailing 3-month average, we trigger immediate board notification and advisory review of non-essential distributions. Proactive intervention prevents default.
02
Cyber / IT Breach Response
In the event of any verified compromise, we activate our COOP Incident Response protocol immediately. A written incident report is delivered to the Lender within 72 hours, with full remediation steps outlined.
03
Continuous Monitoring
Following funding, we implement a continuous monitoring and reporting framework during the critical transition period to provide lenders with unparalleled visibility into borrower performance and operational health.
The Complete Credit Package
Without structured transition oversight, leveraged ESOP transactions face elevated default exposure. We thoroughly mitigate this risk by delivering fully documented, underwriter-ready packages.
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Financials
3 years historical (tax-reconciled), 13-week post-close cash flow, and 5-year projections (including S-Corp tax benefits and ESOP contribution modeling).
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Compliance Verification
ESOP Beneficiary Citizenship Audit & Legal Certifications. Independent ERISA-Compliant Valuation, Equity Injection Verification, & Seller Standby Agreement (120 Months).
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Operational Playbooks
The 90-Day Transition Blueprint, COOP Operational Playbook, Completed SBA Form 159, & Management Separation Affidavits. Everything an underwriter needs for confident approval.
"The founder is not the business. We ensure the tenured leadership team has the independent capacity, cross-training, and operational authority to run the company successfully."
Frequently Asked Questions
The best way to protect an SBA guaranty is to prevent the default in the first place. Our 90-day transition oversight and COOP framework ensures the business remains stable during its most vulnerable window, keeping your loans performing and avoiding the scrutiny that comes with early defaults.
We focus on businesses with at least about 20 employees because that is the critical mass where a viable internal management layer exists, making the business highly attractive for SBA lending. This ensures successor management has the depth and capability to maintain operational continuity.
Absolutely not. We don't originate loans or compete for your banking relationships. We are an operational risk partner that structures employee-ownership (ESOP) transitions and provides post-close stewardship, making companies stronger borrowers for you. Our work runs alongside your existing credit facilities.
Our primary segment is founder-dependent, closely held businesses with $3M–$15M in EBITDA. We also engage select SBA-aligned opportunities below that range when the continuity story and credit profile fit. Headcount often falls in the 20–75 employee range—where succession risk is high and our COOP framework has the greatest impact.
We implement our Continuity of Operations (COOP) framework: systematizing tribal knowledge, securing leadership succession from the broader employee bench, and installing disaster-proof operational systems. Throughout this period, we maintain close oversight with early warning systems to ensure the business—and your loan—remains stable.
We proactively structure every transaction to meet SOP 50 10 8 requirements. This includes comprehensive citizenship audits of ESOP beneficiaries, independent ERISA-compliant valuations, legal certifications from qualified ERISA/SBA counsel, and full disclosure of our advisory role as non-management transition consultants.
Secure Your Portfolio Today
The regulatory landscape is tightening. Your portfolio concentration is showing. The demographic cliff waits for no one. Partner with Forhemit to secure your collateral through proven operational continuity frameworks.
Or contact us directly:
info@forhemit.com