Thresholds for non-PG Debt Financing

by a searcher

1 year ago

What are the minimum EBITDA and minimum tranche size thresholds where one can start to tap into debt financing that doesn't require a personal guarantee (non-SBA)?

What are typical equity cushion %'s for such deals?

What are typical terms and how do they differ from SBA loans?

Which lenders are in the business of making these smaller non-SBA loans?

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7 comments

searcher from The University of Chicago - Booth School of Business

We've seen conventional, non-PG debt at ~2-2.5x EBITDA. Granted, this was for a platform looking to add bolt-ons.

1 year ago | like reply | 0 likes

investor from Harvard University - Harvard Business School

I had an 18m personal guarantee. When we exited a few years later I talked a lot to the bank and they said the pg was mainly so I wouldn't walk away if things got tough. It reduced as ebitda went up. I think it was 500k at the end. We had very low leverage though. The advantage was they were super fast on deals. We bought a bunch of things that weren't profitable that we would sort almost overnight. They were fine with everything and did some due diligence that we ended up making our default. The original one was 2012, the exit was###-###-#### Our lender was an insurance specialist called oak street.
I honestly wouldn't have a clue at terms and conditions today. I think the high base rates and the bank failures have made them entirely up in the air. I know searchers I've invested in go to 50 banks. I guess these days it's another search part of the search.
My overall point really is that you do get some advantages of the pg in being able to do deals more easily and it being a lighter touch on ongoing financial document provision. I can't really compare it to sba as although I've invested in a few, I'd view advice as best from those who've actually signed one and operated under it

1 year ago | like reply | 1 like

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