What buyers expect: “We signed the LOI, the bank likes the deal, diligence is clean. The financing is basically done, we just need the paperwork to catch up.”

What actually happens: the seller gets a second offer, or the landlord won’t assign the lease without proof of funds, or a key deposit comes due, and the senior facility is still three weeks from funding because the field exam isn’t scheduled until Tuesday. The deal doesn’t die because anyone said no. It dies because everyone said yes slowly.

If you’re being pitched the buy-and-build strategy right now, and if you own a profitable middle-market company, some investment banker has pitched it to you, this is the part of the pitch that gets one slide, and it’s the part that decides whether the strategy works.

Why everyone is pitching you acquisitions

The arithmetic is real, so let’s state it fairly. Small companies trade at small multiples; bigger, more diversified companies trade at bigger ones. A $2M-EBITDA services company might trade around 4×, call it $8M. Bolt on three competitors and become a $7M-EBITDA platform, and buyers stop pricing you as a small business and start pricing you as a platform: the multiple itself expands. You didn’t just add EBITDA, you repriced every dollar of it, including the dollars you already had.

That’s the pacman pitch. It isn’t wrong. What the pitch deck compresses into one bullet, “financing: senior debt + seller note”, is where deals actually live or die, because good acquisitions are won on speed, and senior debt is structurally slow.

Why the senior line can’t move at deal speed

This is not banks being difficult. A senior lender committing several turns of EBITDA against a company that doesn’t exist yet, the combined entity, has a checklist that physically takes weeks:

  • Quality of earnings. A third-party accounting firm re-derives the target’s EBITDA from bank statements and ledgers. 3–6 weeks, and it starts late because the target’s books are rarely ready.
  • Field exam and collateral audit. If the facility is asset-based, someone has to physically verify the AR, the inventory, the equipment. Scheduling alone can take two weeks.
  • Legal. Credit agreement, security agreements, intercreditor terms with the seller note, landlord waivers, assignment of key contracts. Every document has two law firms attached to it.
  • Committee. The deal goes to credit committee on the committee’s calendar, not yours.

Sixty to ninety days from term sheet to funding is a normal, healthy senior process. Meanwhile, the deal clock runs on a different speed. Exclusivity windows are 60–90 days. Sellers get cold feet, or warm offers. Deposits, escrows, and key-employee retention packages come due at signing, not at senior close. And the best-priced targets, the motivated seller, the estate sale, the partner dispute, are precisely the ones where a buyer who can move in three weeks beats a buyer who can move in ninety, even at a lower price.

That mismatch, deal speed versus committee speed, is the gap. Experienced acquirers plan capital for it the way they plan legal fees: as a known cost of doing deals, not a surprise.

How the gap actually gets funded

A credit team looking at a gap-funding request is asking one question: is there a defined, credible take-out? Short-term capital against a senior commitment letter is a bridge. Short-term capital against a hope is a loan to a hope. The structures, roughly in order of preference:

Bridge against the senior commitment. Once the senior lender has issued a commitment letter and diligence is substantially done, short-term private capital can fund the close and be repaid from the senior draw. Weeks of speed purchased for a known dollar cost. This is the cleanest version, because the take-out is documented.

Revenue-based financing on the acquirer. When the buyer is itself a healthy operating company, RBF against the buyer’s own revenue can fund deposits, escrows, or a fast close without touching the target’s collateral, which matters, because the senior lender is about to lien all of it. Remittance is sized to the buyer’s cash flow, and the facility clears at senior funding. For a sub-$5M bolt-on, this is often the only capital that can move inside the exclusivity window.

Seller financing as gap absorber. Every dollar the seller carries is a dollar you don’t need to raise this month. A seller note isn’t just price negotiation. It’s the cheapest bridge in the deal, and sellers who believe in their own numbers will carry 10–30%. If a seller refuses any paper, a credit analyst reads that as information about the numbers.

What doesn’t work: stacking short-term advances against the target’s receivables right before an ABL lender liens them (the intercreditor fight will cost you the senior facility), or funding a close with capital that has no take-out. Bridge capital with no defined exit isn’t a bridge. It’s a pier.

The cost question, asked correctly

Short-term capital priced for speed carries a real cost, and the wrong way to evaluate it is to annualize it. A fixed cost on 60–90 day money, annualized, produces a scary number, APR was built to compare 30-year consumer debt, not deal financing. The right comparison is dollar cost against dollar outcome: if $75K of financing cost closes an acquisition that adds $1.5M of EBITDA at an expanding multiple, the cost of the bridge is a rounding error on the value created. If the deal doesn’t clear that bar with room to spare, the financing cost isn’t the problem, the deal is.

Run your own file first

The buyers who win at this are boring about it: senior relationship opened before the LOI, their own debt schedule and financials perpetually diligence-ready, gap capital lined up as a standing capability rather than a fire drill. If you want to know how a credit team would read your company as an acquirer, before a banker’s pitch deck assumes an answer, run the assessment or send us your documents. We’ll tell you straight.

Educational only. Nothing here is an offer of credit, a commitment to lend, or advice on any specific transaction.