Inventory at close - how to fund it?

February 22, 2026

by a searcher from Georgia Southern University in Orlando, FL, USA

I'm looking at a deal that, of course, doesn't have enough SDE/EBIDTA to pay for the inventory. mfr+b2b+b2c sales in a niche space. a realistic 400k EBIDTA & SDE (maybe lower once new rents kick in). they're asking is 4.5x, but doesnt include the ~~1.5M (cost) of inventory that has to exist to make the###-###-#### gross revenue exist. and that puts it at 8x+. is there a way this works? I've mostly avoided inventory businesses that aren't car dealers. I wont even get into the 1M FF&E they unbolted from the purchase price and want to nego seperately now..... I have some personal - not just business - interest in seeing this one succeed, so I'm looking harder - if it was any other etailer like this I'd just have walked away.

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Reply by a searcher
from Rollins College in Orlando, FL, USA

The key issue here is that inventory is working capital, not EBITDA value. If the business truly requires $1.5M of inventory to generate $400k of EBITDA, then your real capital at risk is purchase price plus normalized working capital, which effectively pushes you toward an 8x multiple unless the price adjusts. The right structure is to negotiate a normalized working capital target and have the seller deliver the business at that level, rather than you pre-funding it on top of enterprise value. If inventory turns are strong and financeable, you can layer in ABL or inventory financing to reduce equity, and ideally have the seller carry a note tied to inventory to share risk. But if you are paying full multiple and full inventory with no structure relief, you are likely overcapitalizing the deal. The best way this works is if price, structure, or both change.

Reply by a searcher
from St. Petersburg College in Tampa Bay, Florida, USA

Honestly, no I don't see how it works as they want it to work. That inventory is what generates the profit. Without it, there is no profit. Same with equipment. A normalized level of inventory should be included, especially at that rich of a multiple on a deal this small. That being said, maybe in some universe you can make Consignment of the inventory work, but that might just bankrupt the company. Maybe putting the inventory value in a full standby note. I think for this one the juice is not worth the squeeze. Do you want a business that needs $1.5M of inventory to generate 400K of profit?

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