All equity for the win?

January 12, 2026

by a professional from The University of Georgia - Terry College of Business in New York, NY, USA

It feels like there aren't enough people buying small ($500k) SDE businesses for all cash (cash + any earn out you can). Sure, you don't want to give up the whole pie to investors, but it eliminates the near-term risk of going BK + as you scale, you can recap out. More of this on the horizon IMO.

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Reply by a searcher
from Massachusetts Institute of Technology in Apex, NC, USA

Businesses fail because they run out of cash or the owner quits. That's it. The risk of running out of cash increases greatly if you buy all cash and have none left. E.g. 2MM in cash can finance a 2MM SBA loan for 6!!! years assuming the business breaks even over that period. That's a long time. Short term volatitlity can kill many biz (cash flow issues and run out of money). In terms of safety, the 2MM loan with 2MM cash in the bank/investments is way safer IMO than the fully owned business.

Reply by a searcher
from Queens University in Toronto, ON, Canada

I think there are definitely merits and derisks a deal since theres no debt service and you have potential to recap later. However, I think part of the issue is with a $500k SDE business you are probably paying 3-4x EBITDA. There's not a lot of people with +$1M of liquid assets to close a deal like this, and if they did have that kind of capital, it's likely they would target something larger where the additional of leverage adds torque to returns. Just my two cents.

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