A Rule of Thumb about Leverage

by a searcher

3 years ago

In my experience, regardless of the business's ability to repay the loan expect lenders to offer 2x-3x on the trailing EBITDA for your acquisition. So if you have a business that generated $1M in EBITDA - you might get as much as $2.75M in leverage. But not much more. 

I learned this the hard way. 

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7 comments

searcher from Fundação Getulio Vargas, São Paulo - Escola de Administração de Empresas de São Paulo

Great tip

3 years ago | like reply | 0 likes

searcher from London Business School

Thank you for sharing, Bakari. A few questions: does this apply to the U.S. only? Is your experience recent (during the current ultra-low interest rate levels)? What are your thoughts on leverage not for acquisition, but for funding growth?

3 years ago | like reply | 0 likes

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