Gap Financing For Business Acquisitions

Notice. This page is informational and general in nature. Any transaction remains subject to underwriting, KYC and AML checks, sanctions screening, legal documentation, and third-party credit approvals.

Gap Financing For Business Acquisitions

Most acquisition deals do not fail on strategy. They fail on capital stack gaps between senior debt and sponsor equity.

FG Capital Advisors helps buyers close that gap with structured debt and capital partner introductions, built around a clear path from LOI to funding.

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Where This Service Fits

  • Buyers with signed LOI or APA and a documented funding gap.
  • Search funds and independent sponsors closing lower middle-market deals.
  • Acquisitions where senior lenders require more equity than the sponsor can post.
  • Roll-up platforms needing repeatable gap capital solutions across multiple closings.
  • Situations where timing matters and the seller expects certainty to close.

What Gap Financing Solves In Acquisitions

Deal Constraint Typical Gap Potential Solution Main Underwriting Focus
Senior Lender Advance Is Lower Than Expected Debt proceeds do not cover purchase price plus fees. Structured subordinated tranche or mezzanine layer. Cash flow coverage and downside recovery.
Sponsor Equity Is Insufficient Buyer cannot meet equity requirement at signing. Preferred equity or partner equity introduction. Governance, dilution, and control rights.
Seller Wants Higher Certainty Timeline risk creates closing tension. Time-bound bridge or contingent tranche design. Funding certainty and clear takeout plan.
Multiple Uses Of Proceeds Purchase, working capital, and transition costs exceed base loan. Staged draw structure with covenanted milestones. Draw controls and post-close performance reporting.

Capital Stack Layers We Help Structure

Layer Purpose Typical Position Key Consideration
Senior Acquisition Debt Core debt layer secured against the business. First-lien. Debt service coverage and lender covenants.
Seller Note Defers part of consideration to reduce day-one cash burden. Subordinated or pari passu by agreement. Terms, security ranking, and repayment schedule.
Mezzanine Or Junior Debt Closes debt gap above senior limits. Subordinated. Pricing, covenants, and intercreditor structure.
Preferred Equity Adds non-senior capital where leverage is capped. Equity layer with negotiated return rights. Governance terms and exit mechanics.
Sponsor Common Equity Aligns buyer economics and control. Residual risk capital. Realistic check size and post-close liquidity buffer.

Clear Process From LOI To Closing

Step What We Do Output
1) Intake And Eligibility Screen Review LOI or APA, purchase price, target profile, and timeline. Initial feasibility view and mandate scope.
2) Gap Diagnostic Map total uses and available sources to quantify true funding shortfall. Written gap analysis and target stack options.
3) Structure Design Build stack scenarios across senior debt, junior debt, seller support, and equity partners. Lender-ready structure memo.
4) Underwriting Package Build Prepare credit package, data room checklist, and diligence narrative. Submission-grade file.
5) Targeted Introductions Introduce file to matched debt and equity providers. Indicative terms, counter-terms, or written declines.
6) Term Negotiation Compare pricing, controls, covenants, and intercreditor points. Negotiated preferred term path.
7) Documentation And Closing Support Coordinate with legal counsel and counterparties through final documentation and funding. Executable closing sequence.

What To Submit For A Quote

  • Signed LOI or APA and target closing date.
  • Sources and uses with identified gap amount.
  • Target company financials and operating KPIs.
  • Buyer profile, track record, and post-close plan.
  • Proposed capital stack and existing lender conversations.
  • Draft diligence materials and key legal documents available.
  • KYC and AML package for sponsor and acquisition entities.

Why Acquisition Gap Financing Files Get Rejected

  • No real closing timeline. Vague dates reduce lender confidence.
  • Unclear use of proceeds. If the gap math is weak, terms do not progress.
  • Over-levered ask. Requested structure is disconnected from cash flow reality.
  • Thin sponsor liquidity. No buffer for post-close operations and contingencies.
  • Fragmented documentation. Missing diligence items slow underwriting.

If you have an acquisition deal with a real funding gap, submit the file. We help structure the stack, run targeted introductions, and move the transaction through underwriting to closing.

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Disclosure. FG Capital Advisors is not a bank or direct lender. Services are provided on a best-efforts basis through third-party capital providers and remain subject to underwriting, compliance, and definitive legal documentation.