Funding a bit larger deals

searcher profile

December 24, 2024

by a searcher from University of Oregon - Charles H. Lundquist College of Business in Bethesda, MD, USA

Hi! The content here is awesome and I thought I would throw this out to the collective knowledge of the community. I hear lots of searchers talking about businesses with EBITDA in the $1-2MM range. While I think this gets you a certain kind of established and weathered business, I'm curious how funding is working in these ranges since some of the profit numbers would imply valuations >$5MM that the SBA would fund and require cash injections that are substantial. I'm looking to hear from anyone that might have done this and how you structured the deal? Thanks in advance for the help.

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commentor profile
Reply by a lender
in Oakland, CA, USA
Pari Passu is your strongest bet for debt, which is a combination of conventional + SBA to exceed $5M. These deals are much harder to get done, and liquidity becomes even more important. Usually lenders are going to require 10% (or up) of cash directly into the deal.

Most commonly though I just see searchers max out at $5M SBA debt, and use larger seller notes to bridge gaps.

Feel free to DM me or email me at redacted if you want to discuss further.
commentor profile
Reply by a searcher
from Columbia University in Jacksonville, FL, USA
^redacted‌, I would argue that larger deals are easier to fund, unless they are between $1M and $2M in EBITDA. PariPasu (to 7.5M in debt), extra equity, SBIC funds will all help in this area. Past 2M in EBITDA you can definitely find PE firms that do this or SBIC funds. Past 3M in EBITDA, you will have many suitors. Capital is a commodity, deals valued at low multiples are the true currency.
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