As you all may know...

With the recent changes in the SOP, business acquisitions are eligible for 0% borrower injection so long as there is minimally a seller note of 10% of project costs on standby for 24 months.

At Ready Capital we are closing this structure - recently on a $4.8mm specialty heavy haul trucking business, 10 year term.

The caveat?

We apply this structure when it is a manager / key employee / longtime insider buying out the business.

Now how does this apply to Searchers?

Take for example a Searcher find an HVAC company that they would love to buy. The searcher does not have experience in HVAC and does not have a lot of capital to inject.

Rather than source the injection from investors, we are now seeing searchers partner with the managers of the business to purchase the business.

In some instances, we see the searcher retain 80% ownership and the manager 20%. This way the manager is a PG on the loan and it helps mitigate key man risk. Other times, for stronger deals, we are seeing a 90% / 10% split with no PG from the manager.

All while structuring 0% borrower injection.

From the Lenders perspective, we see this structure mitigating the experience & key man risk.

From the Searchers perspective, this enables them to forgo lengthy and complicated searches for investors, mitigates key man risk, enables a more passive acquisition as they have an insider with interests and risks aligned, and makes their deal more attractive to certain lenders.