How to explain 40/60 deals to bankers?

searcher profile

February 10, 2023

by a searcher in Dallas-Fort Worth Metropolitan Area, TX, USA

Hi, anyone knows how to explain 40/60 deals to bankers?
I tried to explain it but seems they don't understand, so any suggestions?
what I understand is seller holds 40% and you get 60% from the bank and the whole operation income covers 100%
of 60%?
how can I make them say yes to the deal?

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commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
Unfortunately you have to be working with the right lenders. If you are dealing with a small business banker, likely they are going to look at the deal based on requiring a certain amount of equity the transaction from you. They often will not counter the seller roll-over as equity. This is because their institutions give them a very defined swim lane to work with. You need to work with Bankers that specialize in business acquisition finance and that will consider the seller roll-over equity as true equity.

We have lenders willing to look at deals under this scenario and have gotten similar deals done before. If you would like to discuss you can reach me here or directly at redacted Good luck.
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Reply by a searcher
from Hofstra University in New York, NY, USA
Ensure that the bank you're speaking with funds deals within your target industry and get a general idea of their terms

You don't know that the income will cover debt service until you know the above. As their terms combined with the seller holdback and/or financing would dictate the total monthly debt service.

Once this is all figured out. I would put together a Sources and Uses Table and a Debt Table.

I would then communicate the above to the banker along with details on the company and get their feedback on whether or not their bank will finance this deal.
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