Question for lenders

May 24, 2025
by a searcher in Chicago, IL, USA
I'd like to understand how lenders look at the equity contribution when evaluating lending opportunities. Do they base it on equity vs cash at close, or equity vs EV? Here's an example:
EBITDA: $2.5MM
EV: $10MM
Cash at Close: $8MM
Seller note: $2MM (on full standby for 5 years)
Buyer Equity: $2.5MM
Based on these numbers, would lenders say that there is 31.25% equity going into the deal? ($8MM x 31.25% = $2.5MM).
Or would they calculate they equity contribution based on the EV of $10MM, which would reduce the equity to 25%?
Thank you
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA