Preferentials for outside investors in self-funded deals?

searcher profile

August 30, 2021

by a searcher from University of Pennsylvania - The Wharton School in New York, NY, USA

I'm wondering what (if any) are the typical preferentials given to outside investors in self-funded deals?

Jim Stein's blog said he typically sees a 8-15% coupon given to outside investors, but I've also heard anecdotally that self-funded searchers don't give any preferentials to outside investors if they're providing a 7a PG. I'm wondering which is true and what other types of preferentials searchers may be giving?

Thoughts?

If there are any good resources to look this type of info up in lmk...

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commentor profile
Reply by an investor
from University of Pennsylvania in Washington, DC, USA
Happy to chat. Jim's right. I laid out some of basics of self-funded search using SBA 7a economics in this webinar - https://www.searchfunder.com/event/view/280 - happy to share slides too that lays out some example - redacted . But it's generally a preferred instrument to investors that's 8-15% pref and also converts into common % as well###-###-#### % for self-funded deals using 7a if raising <2M).
commentor profile
Reply by an investor
from HEC School of Management, Paris in Paris, France
John, you are right. In my views, self funded search funds bring to potential investor an extra flavor of entrepreneurship and a possibility to open ticket size and share holder agreements more freely which can attract investors keen to bring more important tickets and get more adequate rights in the SH agreement
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