Do lenders typically cap how much they will lend as a multiple of EBITDA?

searcher profile

December 14, 2024

by a searcher from University of Connecticut in West Newbury, MA, USA

Hi all,

I am looking at a deal that’s approximately 2.5mm EBITDA and we’ll likely land at 4.5-5x on the purchase

Do lenders typically cap how much they will lend as a multiple of EBITDA? I’ve heard people float 2 or 3x EBITDA but not sure if that’s lender specific. We’re ideally looking to get 65% conventional debt (+20% seller financing) so around 3x EBITDA on conventional.

Is a professional appraisal required?


How do lenders view out of state transactions if there is a GM in place/the seller stays on contract for several years?


Lastly, for conventional debt on a deal like this (3-4mm of inventory and assets) is a personal guaranty usually required?

thank you!

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commentor profile
Reply by a lender
in Ponte Vedra Beach, FL 32082, USA
^redacted‌ an appraisal for business valuation would almost always be required. With new owner out of state generally would require minor equity provided to GM and key employees for continuation of operations. Some lender may require they provide limited guarantees as well. Depending on terms of the contract and length of time prior may not be necessary. For most conventional lenders, a PG would be required, it will depend on the types of inventory as most does hold significant value and what the other assets are(useable life remaining, type of assets,etc). Happy to have a conversation, my cell is###-###-#### and email is redacted Or my calendly is https://calendly.com/bturner-thebancorp/45min
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Reply by a professional
in Mumbai, Maharashtra, India
Hello ^, redacted‌ we are a full service global accounting firm with presence in 7 countries (500+ professionals) and assist lower and middle market transactions extensively. Our India presence, allows us to be cost efficient and at the same time maintain the quality of our deliverables. Happy to connect with you to discuss this at length. We could help you with a professional opinion Email me at redacted for more details.
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