(replay)Art of the Roll-Up: 40 Businesses in 4 Years

So let's do the first, the debt with that local bank that you talked about, and then growth equity from the person who'd been the managing director at, what was the name of your previous firm? Reservoir. Reservoir. So the debt, assume not a ton of knowledge about the non-SBA debt. You said they offered it at two times.

What did you mean? Just walk us real slowly through that.

Yeah. We are not willing to give you back leverage on your portfolio, meaning we're not going to loan you against what you've built so far. But we'd love to support you going forward in your future acquisitions. So basically, for school number six...

we said, hey, it's making X and the bank said, great, we'll loan you 2X against that. And so from the bank's perspective, 2X is a reasonable threshold to advance on any business, but they also have the coverage of the portfolio. So they have some equity coverage behind them.

And then of course, this is regional bank debt, so this is fully personally guaranteed. So they also have me on the hook behind that. So I think it was – I don't think the bank took an extraordinary risk or anything in doing that.

But nonetheless, it was a very creative structure for a bank to take, particularly given that the business was like a $2 million revenue business. It was a small business at that time. I think that's one of the great things about the banking ecosystem is –

There are so many small and medium-sized regional local banks in this country. It's just a numbers game. If you go talk to enough people, if you have reasonable business propositions, you'll find the right bank that's willing to do it.

And we were fortunate that we got in touch with First Western Trust, and they're great to work with. But that was how that structure worked was it was a facility for funding go forward acquisitions where they said, we get what you're doing. We get that you're going to do it a bunch more times.

We're not going to ask you to take us from the beginning every time that you're doing it. We're going to take the cushion that exists in the business and we're going to use that as the basis for giving you kind of a programmatic delayed draw facility. So here's a cap that you can draw against.

Up to that cap, as long as it meets this criteria, just email us and we'll advance you the money.

And so let's play with some easy numbers as an example. So say acquisition number nine had $100,000 of cash flow and you were going to buy the school for $300,000. They would give you a check for?