Debt Request - Family business transition to next gen long time operator of the business

August 06, 2025

by an investor from Baylor University in Aledo, TX 76008, USA

Hey Searchfunders, I am helping the Buyer purchase the company from his father-in-law. Buyer has been operating the company for several years, as father-in-law has been an absentee owner. Our current bank will not allow the $5MM in senior debt to be a longer term than the $12.5MM seller note. We are seeking $5MM in senior debt on a 10-year term. Seller wants a 5-year term on his note. TTM EBITDA is $3.5MM. There is real estate with the transaction as well. Any help would be appreciated. Let me know and I will send a term sheet with a more detailed request. Thanks

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Reply by a searcher
from Rhodes College in Houston, TX, USA

Be prepared to show the business' capacity to serve both tranches of debt under various financing and operating cases. For example, what would the monthly payments be for each security under a range of amortization timelines? Knowing what the payments could be, what do leverage & fixed charge covenants look like in a base and downside case? How bad does the downside case have to be to get into trouble? If the seller note is a balloon payment, what scenarios do you fall short at maturity? If ebitda was flat over 5 years, that's $17.5mm - does the business currently have >70% FCF conversion? What is the capital allocation plan for growth reinvestment vs cautionary debt service? Thinking through exercise helps you strategically at the negotiating table as well as gives credibility. The model outputs should be dropped into a few annotated slides that accompany a live discussion.

Reply by an intermediary
in Philadelphia, PA, USA

Good evening Troy, we help acquisition entrepreneurs, searchers, & fundless sponsors raise capital deal-by-deal for acquisitions. I sent you a LinkedIn connection request, we may be able to help facilitate this. We’re in the process of finalizing a $5M raise at the moment. I’d love to hear more details and see how we may be able help.

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