Non-dilutive funding without personal guarantee?

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July 20, 2023

by a professional from Bentley University in Boston, MA, USA

Is anyone aware of any sources of non-dilutive funding for acquisition that do not require personal guarantee?

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Reply by a professional
from Franciscan University of Steubenville in Denver, CO, USA
I have not been in the debt markets for several years. Pre-SVB failure days, some regional and community banks did non-PG deals with banknotes at 50% or less of the transaction value with a combination of seller notes, mezz, and equity injections to round out the deal structure. Typically these lenders wanted to stay at under 2.5x funded debt to EBITDA. They would also add cash flow recaptures to attempt to pay the senior note back within 3-5 years vs 10 for a 7a. But I agree with the comment above that Mom and Dad are your best bet for a non-PG deal predominantly with the tightening of the credit markets.
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Reply by a searcher
from Hofstra University in Melville, NY, USA
If you have assets as collateral you may be able to get debt without a PG. Most will want an equity kicker to lend without that PG.

Just an idea that I did once is to pledge the assets of the business I was buying for debt at the closing. Mostly receivables, and all docs with lender were signed and in escrow prior to closing acquisition and pending it closing.
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