Working Capital: Finance with loan or bring as cash?

April 07, 2025
by a searcher from University of Miami in Indianapolis, IN, USA
After reading Erica's excellent post on Working Capital [https://www.searchfunder.com/post/working-capital-for-dummies] I gave some more thought to the working capital needs of my own deal. I'm interested in others' thoughts on financing vs. using cash to fill a WC gap in a deal.
I'm under LOI to acquire a demolition and environmental remediation business. The accepted offer is an EV of $3.35M (3.1x EBITDA) plus $700K Working Capital.
My QoE provider's recommendation is $1.25M WC, which is###-###-#### months' worth. In this scenario with high WC needs, is it better to get a lender to finance additional WC as part of the loan (if the business supports it), or to use your own cash (if you have it?).
The advice I've received is to get as much WC as possible, more than I think I'll need. I'm comfortable with $1.25M but not sure the best way to get there.
Thanks in advance for your thoughts.
from City University of New York, Bernard M. Baruch College in San Francisco Bay Area, CA, USA
from University of Southern California in Los Angeles, CA, USA