HOW MUCH CAN I BORROW FOR EACH DOLLAR OF EBITDA?
I am considering to launch a search fund to look for and acquire a franchise brand in Australia, light in assets. I have explained the growth strategy in fine details to three potential investors in my personal network. All of them like the ideas. Two of them will invest up to 4 million USD when a deal is found. The third one has agreed to consider similar opportunities in 3 years time when she can withdraw fund from another investment. In addition, I am working on the marketing of a franchise brand in this industry. The owner has acquired this brand recently, likes my ideas, and will fly from another city to meet with me and discuss holding equity in his company. These strong interests indicate that the strategy is feasible.
I am trying to figure out how much money I can borrow, and how much more fund I need to raise. The franchise contracts are typically 5 to 10 years. how much can I borrow for each dollar of ebitda in this type of business?
Thanks for sharing your experience and insights.