How to Raise Debt and Equity for $2.5M+ EBITDA Deals

This Week in ETA:

• Searchers: If you end up buying a business over $10m of enterprise value, you might need to raise money under Independent Sponsor terms instead of Self-Funded Search terms. This is because you’ll typically need 30% - 50% of the total deal to be equity, instead of the 10 - 20% that works when you can get an SBA loan. I’ve talked about how we love to back independent sponsors who act like self-funded searchers (namely, they plan to operate themselves after acquiring). Make sure you understand the standard independent sponsor deal economics so you come across as credible when raising money.

• Investors: One of the best changes I have made in going from searcher to investor is pulling together the right team to help me review deals and execute well. I wrote about my personal team of advisors here - from industry guidance to diligence, legal, and lending, I feel fortunate to know some of the best in the business.

Partner Perspective:

Matthias Smith, Pioneer Capital Advisory: SBA 7(a) financing has long been a cornerstone for acquisition entrepreneurs, offering high leverage, long amortizations, and attractive rates. That said, as deal flow evolves and buyer profiles diversify, we’re seeing increased demand for financing solutions that provide greater flexibility, higher leverage, and faster execution than the traditional SBA route can offer. One of the most meaningful developments in our practice over the past year has been the expansion of our non-SBA lending platform.

Non-SBA lenders—cash-flow, asset-based, mezzanine, or independent credit platforms—share a consistent priority: underwriting the sponsor as closely as the business. The ideal “credit avatar” typically includes:

• Relevant or adjacent operating experience

• Adequate equity and post-close liquidity

• Clear value-creation thesis – Defined plan for growth or operational improvement

• Disciplined deal structuring balancing cash flow coverage, serviceability, and risk

• Track record of management or investment experience demonstrating prudence

For SBIC-backed deals specifically:

• Buyers should be experienced, disciplined, and operationally capable, ideally with either direct industry experience or private equity/investment banking exposure.

• SBICs underwrite credit risk, so ability to manage leverage, run the business, and integrate add-ons is essential.

• Risk sensitivity favors strong cash flow, recurring revenues, margin stability, low customer concentration, and avoidance of speculative or cyclical industries. Since SBICs follow SBA’s “prudent investor” standard, cash flow quality is more important than a growth story.

• SBICs prefer seller involvement through rollovers or earnouts, typically target deals requiring $10M+ in financing, and structure capital stacks based on cash flow durability, risk profile, and alignment.

Acquisition financing today often blends multiple sources: senior debt, seller financing, mezzanine/subordinated debt, equity partners, and asset-based financing. Pioneer’s non-SBA capabilities help match the right capital stack with the right lenders, positioning our clients for efficient, strategic, and successful acquisitions. Interested in exploring non-SBA debt? Please reach out to our team.

Plus:

• Fantastic advice on mitigating transaction and deal costs when a deal doesn’t work out.

• Solid round-up of common mistakes to avoid when buying a business. I can’t say enough how crucial it is that you trust, but verify. Doing an acquisition with a seller you don’t trust is an automatic no-go, but so is not doing your own diligence and investigation to protect yourself.

Question:

Hit reply and tell us - What resources have you found most helpful in learning about the deal economics of independent sponsor deals?