How do I structure the acquisition of a company in a way that satisfies both the lender and the seller?

I found a company whose owner is willing to sell for 4X EBITDA. He is planning to retire in a few years. I also found a lender willing to lend 4X EBITDA. So you’d think that’s that. However, the lender then said his organization has a rule against financing 100% of the purchase price. It wants a 25% equity component. So I determined the seller was willing to reinvest 25% of the purchase price to have a 25% stake in the new entity I will create to buy the assets of his company. So that would seem to address the lender’s concerns. However, there are still two issues: 1) I am afraid the lender will not like the fact that the equity is coming entirely from the seller; and 2) If the seller finds out that he’s putting up all of the equity, he will demand all of the profits instead of just 25%. An obvious solution would be for me to put up all of the equity (instead of getting it from the seller) but I don’t have enough cash to even come close to 25%. Mathematically, this deal is very doable since I can get enough debt (from the lender) and equity (from the seller) to put it together. The problem is how do I structure it so neither the seller nor the lender objects? There has got to be a creative way to satisfy the needs of all three parties.


There are several creative ways to get this deal done. Feel free to call or email me.

Answered 9 years ago

Depending on your particular scenario, you may be eligible for SBA7a, or 504 - with only 10% down. Many times you can also get 1/2 of that back at the closing table.
There may also be other options, available as well.
I can help you structure your deal, and also assist you with creating a financing request likely to be approved. You must always have some of "your own skin" in the game, as the days of "100% financing" are long gone.
There are a variety of ways of acquiring your down payment, though - depending on how creative one can get!
Then, of course - you need to know how to "season it" so that it will be acceptable. Commercial financing has many variables to it - and every deal is different. It takes years of experience to acquire the knowledge needed to employ the many various options available, and to know which would be best for any particular deal.
The ultimate in every scenario is to achieve a win/win for all involved.

Answered 9 years ago

Unlock Startups Unlimited

Access 20,000+ Startup Experts, 650+ masterclass videos, 1,000+ in-depth guides, and all the software tools you need to launch and grow quickly.

Already a member? Sign in

Copyright © 2024 LLC. All rights reserved.