Any creative ideas on how to make up equity investment gaps?

by a searcher

3 years ago

What sort of terms and/or deal scenarios are you seeing when it comes to equity gaps? As a self funded searcher, I have limited capital to invest in the equity injection and for DD costs. I'm curious for someone like me to consider larger deal sizes, what options are out there being self funded?

Do you ever see individual investors putting up some capital in exchange for a fixed return on their investment instead of equity? (more like a short term loan) I would think with enough EBIDA, you could pay that back fairly quickly but maybe in practice, it doesn't work that way.

My personal capital limits me to 'upper Main Street' deal sizes that in many cases, are buying a 'job' vs. lower middle market companies that have more stability and I'm trying to see what options I may have to move more upstream in terms of deal size.

Thanks.

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searcher from Dartmouth College - Tuck School of Business at Dartmouth

I don't know someone that's used this in ETA specifically, but I had a conversation with an economic development agency in NH that will enable loans on 5% equity positions. They've done it on asset purchases. Less clear if they'll do it on cash flow. Loan officer brought it up in the context of ETA, though. Seems worth exploring with whatever agency is local to your deal.

http://www.ncic.org/the-95-partnership-program/

3 years ago | like reply | 0 likes

searcher from Dartmouth College - Tuck School of Business at Dartmouth

Local economic development organizations will not invest in equity, but are willing to be subordinate debt holders and in some cases can reduce equity requirements for a deal below 10%.

3 years ago | like reply | 1 like

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