Debt to Equity Ratios in Self-Funded Acquisitions

March 20, 2024

by a searcher from Williams College in New York, NY, USA

Hi All,

What is the typical debt-to-equity ratio in self-funded deals these days, and how has this changed in the higher interest rate environment? I realize the answer will depend on creditworthiness, type of business, and other factors - however, I am curious about what folks are generally seeing. Assume there are no additional investors, the deal is fully self-funded.

SBA loans typically require borrowers to contribute 10-20% of the total project costs, is this the equity range that deals are actually being financed with?

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

If you are doing an SBA deal, we are typically seeing deals get done with 10% equity from the borrowers and sometimes less if the seller is holding a note for 10% of the transaction or more on standby for at least two years. However, the cash flow obviously has to still support the debt service with that much financing. If it is conventional debt, we are typically seeing maximum leverage of the lessor of 50 to 65% of acquisition cost and no more than 2 to 3x multiple of adjusted EBITDA. If you need any help analyzing any opportunities please let us know. We would be more than happy to assist you. You can reach me here or directly at redacted

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