The Death Valley of Funding $10 -$15M in EV

May 16, 2024

by a searcher from Columbia University - Columbia Business School in Jacksonville, FL, USA

So, I find it really easy to fund deals in the $5M range (SBA) and > $25 - $20M (Independent Sponsor), but find it extremely difficult to find funding in the middle because most conventional financing institutions have thresholds of $3M in EBITDA and this is kind of a "tweener.'. It's this squarely in Conventional, Conventional + Mezz, SBA + Mezz land? Any help is appreciated.

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Reply by a professional
from University of Notre Dame in New York, NY, USA

Thanks for the tag ^redacted‌ - The core of my practice is working with independent sponsors on deals in the $10-30M EV range. Typically the sponsors have at least one outside investor (typically a family office and we set up a JV structure with them on the front end). Agree that it can be more difficult to fund in the "lower" independent sponsor window between $10-20M. What I've seen, is to bridge the rest of the financing gap (and this applies to independent sponsor deals of all sizes) its typically a mix of (i) seller note or earn-out and (ii) sometimes a smaller piece of bank debt to fund any gaps. I've also had buyers assume certain liabilities in exchange for "credits" against the purchase price. If the obtaining traditional financing proves to be difficult, you can be creative around structure to make up the delta. That being said, all independent sponsors I've worked with (besides one) has had at least one outside anchor investor, which gives a bit more flexibility on funding deals of every size. Happy to chat more if you want to pick my brain (DM or shoot me an email at redacted

Reply by an intermediary
from Clemson University in Raleigh, NC, USA

It's a challenge getting deals done because the SBA maximum guarantee is only $5,000,000. Any enterprise value above that has to be with a pari-passeu lender, seller financing, mez - all challenging for different reasons.

The last time the SBA limit was increased was in 2010 from $2 million to $10 million. Assuming a 3% annual cost of living increase this means business buyers have 42% less purchasing power as they did 14 years ago.

This is why approximately two months ago Steve Mariani (Diamond Financial) started lobbying for a loan guarantee increase to $10,000,000, If interested we recorded a short video about the justifications for an increase:

https://enlign.com/blogs/sba-sop-change-to-5-million-guarantee-cap-to-allow-individuals-to-receive-multiple-guarantees

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