Kevin Bibelhausen, Principal at Fruition Capital, joined host Joe Hellman, Partner at Redpath and Company, on The Transaction Abstract podcast. In this episode, Kevin and Joe discuss the “self-funded” transaction; what that means, what does a self-funded process look like, and why self-funding could be a viable option for business owners—or self-funded searchers—looking to acquire other businesses.
According to Bibelhausen, self-funding really means that the self-funded searcher doesn’t raise a salary. They pay for their own search, they incur all the costs of the deal, they have savings they most likely will need to live off of, and they have a job to maintain. Self-funded transactions are typically done with very little equity and a higher percentage of debt. Many times, the debt is financed through an SBA loan and associated programs.
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This is a “bet on yourself” transaction with the self-funded searcher taking out a personal guaranteed loan. Through the transaction, the searcher becomes the owner—a majority owner—not just the CEO. The searcher may keep upwards of 80% of the business versus a minority share in a traditional transaction.
About Fruition Capital: Fruition Capital is a firm dedicated to working with entrepreneurs to acquire stable operating businesses as their owners retire. Kevin is also the Managing Partner of Black Sail Strategies, a private investment firm focused on acquiring SMBs in the Southeastern region of the US. For more information, visit https://fruitioncap.com.