Introduction
Debt is essential for most acquisitions — but too much can sink the deal (and the business). The key is structuring acquisition financing in a way that balances opportunity with sustainability.
Yaw Capital specializes in structuring debt packages that lenders approve and buyers can manage.
Understanding Leverage in Acquisitions
- Healthy leverage: Debt is supported by the business’s cash flow.
- Overleverage: Debt exceeds the business’s ability to pay, creating risk for both buyer and lender.
SBA Loan Leverage
SBA 7(a) loans typically require:
- 10–20% equity injection
- Debt coverage ratios of 1.25+
This ensures debt levels remain sustainable.
Senior vs Subordinated Debt
- Senior Debt: First in line for repayment, lower risk, lower cost.
- Subordinated/Mezzanine Debt: Higher risk, higher interest, but fills financing gaps.
Creative Structures
Yaw Capital often structures deals by blending:
- SBA loans for stability
- Seller financing for flexibility
- Private debt for speed and leverage
Conclusion
The smartest buyers don’t just chase maximum leverage. They build sustainable capital stacks that close deals and preserve business health. Yaw Capital knows how to structure debt the right way.
