Cash Sweep

by a searcher

4 years ago

I'm curious what people's experiences have been with successfully removing a cash sweep? I know for some lenders, the exclusion of this can be a non-starter but I'm curious if there are ways to distribute (excess) cash to shareholders early.

1 like
131 views
2 comments

searcher from INSEAD

I would ask for a % cash sweep rather than full cash sweep. i.e. if there is excess cash flow, [50]% of it has to go towards debt repayment, rather than the full amount

1 day ago | like reply | 0 likes

searcher from University of California, Berkeley - Haas School of Business

Former banker here. Sweep structures can be loosely put into two categories: 1) ABL or Revenue based loans and 2) structured to de-lever. The latter is called excess CF recapture which is negotiated at term-sheet phase for lender to address bringing down leverage in a defined time time. For ABL loans, if CF leverage and collateral coverage is solid, sweep can be relaxed. On Revenue based loans, the lender gets comfortable largely by having first position to your cash (hence the most difficult to avoid sweep. To address your distribution question, most lenders want control and priority over dividends.

4 years ago | like reply | 0 likes

More on Searchfunder

Just Closed on My First Deal! Reflections and Takeaways for other Searchers

45,152 transactions are available on Searchfunder (now searchable by keyword)

Now everyone has unlimited IBISWorld access

Family office looking for traditional searchers

Self Funded Acquisition: A few Things I Learned

Examples of self-funded searcher websites

2 Best Ways To Find Motivated Sellers, Off-Market Deals

6-7x for a Self-funded Search Deal?

Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.

We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.