Valuation Based on Recent Growth

In this section Heather explains that while rapid growth is exciting for buyers it often worries lenders. A primary concern is that the debt coverage ratio may only look strong for the most recent period making the loan appear risky when compared to the smaller cash flows of previous years. Lenders also question why a seller would exit during a growth surge and worry whether a new owner can maintain that momentum. To mitigate these concerns Heather suggests bringing in more equity to lower the bank’s leverage or using a forgivable seller note that only pays out if high revenue levels are maintained for several years. Additionally providing a clear visual of the sales process and securing a robust non compete agreement from the seller can help reassure the bank that the growth is sustainable and the transition is safe.