General Approaches to Deal Structuring?

June 17, 2025

by a searcher from Indiana University at Bloomington in St. Louis, MO, USA

Looking for any helpful resources, links, videos, articles, or comments that help me think more strategically about my deal structuring. For bids I've submitted to date, I've used ETAIQ to model out IS / cash flows, considering my personal expenses, maintenance capex, and some other standard deal dynamics. Once I've got the basics in there, I'm really just adjusting the % SBA loan and % Equity injection such that: - I've got a good debt service coverage ratio (modeling towards 1.5x for now, to be conservative) - The cash due on closing from my bank account is feasible w/ my current cash position Beyond the two points above, I've gotten recent advice to consider NWC required on Day 1 and to preserve enough cash in my own bank acct such that I can cover personal expenses and shit hitting the fan in the business in the first ~6 months of ownership. What am I not thinking about that I should be? Does anyone have a general framework or process for developing a deal structure they would recommend? I don't have a lot of process or strategy built into my current approach so I'd love to get thoughts on how best to do that.

Reply by a searcher
from University of Pennsylvania in Denver, CO, USA

You might want to consider stress testing your model with various scenarios to understand how much your cashflow situation and DSCR changes if these possible situations are realized. For example, if you lose your largest client/contract how much does this impact cashflow and DSCR? Are you still able to make the monthly SBA loan payments? You can sometimes use the output, under these hypothetical scenarios, from your model to negotiate a better deal structure. For example, if losing the largest client causes DSCR to drop too low (e.g. below 1.1) then you might be able to negotiate for a larger seller note that is forgiven (or partially forgiven) in the event that this situation actually arises. If the seller is not willing to negotiate an alternative deal structure (which can often happen for deals that attract a lot of interest) the stress test still gives you a good understanding of the financial risk that you could be exposed to post acquisition.

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

You’re thinking about the right fundamentals: DSCR, equity check, and personal runway. To strengthen your approach, add a detailed Sources & Uses table, include working capital true-up, seller notes with interest-only periods, and stress-test post-close cash flows for downside (e.g. 20% revenue dip, delayed collections).

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