This week's podcast episode attempts to touch on a series of questions that I've been asked particularly frequently over the past 6 months or so related to the state of the debt financing markets for small businesses. To answer some of these questions, I chose to interview two lenders who have a combined 40+ years of experience lending to lower-middle market businesses not just to finance their acquisitions, but also to finance growth initiatives, day-to-day working capital needs, and leveraged recapitalizations, to name a just few. Among other things, in this episode we cover:
- The current state of lower-mid-market credit
- How lenders have changed their views on the following major terms & considerations: The quantum of debt that they offer to fund buyout transactions, covenants, pricing/interest rates, percentage of free cash flow dedicated to debt service, base case model assumptions, and others
- How a first-time SMB buyer should think about how much debt to put on a deal
- How competitive the average lower-mid-market deal is in this market
- How banks think about the inclusion of seller financing in any given buyout transaction
- How borrowers should think about fixed rate v. floating rate debt
- Questions that credit committees are asking now that they weren’t asking 12 months ago
- What actually happens when a borrower trips a covenant
...and many others.
I hope this conversation is helpful in addressing some of the FAQs that you may have about the current state of the debt capital markets.
Link is below, please enjoy!