Raising debt with flexible covenants

August 26, 2021
by a searcher from Massachusetts Institute of Technology - MIT Sloan School of Management in Boston, MA, USA
We have a business under LOI. In the first 2 years of ownership, this business will need internal investments to finance an update of the technology stack (this will be mostly classified as capex). To this end, we'd like to have some flexibility in our debt documents to allow us to fund these investments from our cashflow. Perhaps there is either covenant relief for first 24 months or ability to PIK the interest for some time.
It would be great to connect with someone who raised debt on these terms OR someone who works at a capital provider who is comfortable with funding a debt structure like this?
My sense is that traditional banks have a tougher time doing non-standard loans but I welcome folks' thoughts on that front as well (are there banks who'd be open to flexibility?)
Thank you!
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
from Western Michigan University in Grand Rapids, MI, USA
The second and more common option is for the seller to finance the transaction through the deal terms. There are a lot of options for these alternative terms but essentially there is a lot less traditional debt or cash provided at close for many of them.
The final one is if there is real estate there might be a sale-leaseback option available. This option can free up capital now to be used for current needs in exchange for entering into a longer-term lease that allows the investor to get the desired return on their investment.