with Hard money lending business · Hard money lending business
LenderHawk analysis. Not affiliated with or endorsed by Acquisitions Anonymous.
The hard-money lender is not worth a simple SDE multiple on top of the seller’s own loan book; the seller’s $7 million in equity is better treated as capital to be collected or rolled rather than as operating goodwill.
A buyer should not put fresh debt or equity into a business just to receive the same capital back within a year; that turns the purchase into a low-upside carry trade with downside risk.
If the seller already manages third-party capital off-book, the cleanest acquisition may be to convert the seller’s equity book into an LP position and preserve the existing economics under a new operator.
The real asset in a private lending business is the lending platform and borrower relationships, not just the current outstanding loan balance.
Assignment of dozens of loans and investor commitments can become the main closing obstacle even when the underlying business looks simple on paper.
The equipment-rental listing should be underwritten on cash flow after replacement capital, not on EBITDA, because the fleet will eventually need to be refreshed.
Asset-heavy businesses can look cheap when priced against the stated asset base, but the buyer must verify age, useful life, financing needs, and replacement timing of the equipment.
A broker’s overly enthusiastic explanation of why a deal is available can be a warning sign that the business has hidden operational issues or an unusual amount of seller coaching.
Treat seller-owned capital pools as investor capital that can be re-rolled into a managed structure rather than as purchase-price goodwill. This preserves the economics of the existing loan book while lowering the buyer’s upfront capital requirement.
When to use: Use when the seller controls a book of capital or receivables and the buyer is mostly buying administration, underwriting, and borrower relationships.
For equipment-heavy companies, EBITDA is not the right base; the buyer should subtract the cost of future fleet replacement and financing from operating profit to understand true distributable cash flow.
When to use: Use when the business depends on trucks, lifts, machinery, or other depreciating assets that will have to be repurchased on a predictable cycle.
The hard-money lender was asking $10 million in Texas with three employees and an absentee owner.
The hosts read the submitted listing details before debating valuation and structure.
The lender’s total loan book was $22 million, with $7 million in seller equity and $15 million in third-party off-book capital.
The deal economics are split between the seller’s own capital and managed investor money.
The loan products were roughly a 16% APR business once origination fees were annualized on a six-month term.
Bill reverse-engineered the pricing from a 10% rate plus a 3-point fee and a 12.25% rate plus a 2-point fee.
The hard-money business reportedly had a default/foreclosure rate under 1%.
This was presented as a seller claim, but the hosts stressed that loan-level diligence would still be difficult.
The seller said the business was not SBA financeable because hard money lending is explicitly excluded.
The hosts accepted this as a category issue rather than a deal-specific red flag.
The equipment-rental listing in Colorado asked $2.6 million against about $3 million of revenue and $760,000 of annual cash flow.
Mills read the BizBuySell teaser and the panel immediately focused on whether the asset base and earnings justified the price.
The equipment and vehicles were said to be worth about $2.3 million, and total assets about $2.7 million.
The broker framed the price as being below current asset value.
The business had 2019 revenue of $3 million and earnings of $760,000, versus 2018 revenue of $4.4 million and earnings of $953,000.
The hosts used the prior-year numbers to question cyclicality and consistency.
The broker said no other equipment rental business was within 20 miles.
This was used to highlight the location advantage and also the concentration risk of serving a narrow local market.
Treat the seller’s $7 million loan book as capital to be rolled or collected, not as purchase price you need to finance at closing.
Why: Otherwise you are paying to receive the same money back later with no meaningful upside.
Structure heavy earnouts when the value depends on borrower and LP relationships rather than hard assets.
Why: The buyer can learn within 6 to 12 months whether the business transfers, so deferred consideration protects against paying for nontransferable goodwill.
Convert the seller into an LP or managed-capital provider if the business already earns a spread on off-book funds.
Why: That preserves the existing economics while reducing immediate cash required from the buyer.
Underwrite equipment-heavy deals on financed replacement costs, not on book value or historical depreciation schedules.
Why: The fleet will eventually need to be replaced, and the true cash yield can be far lower than EBITDA suggests.
Be skeptical when a broker writes a long marketing memo about how much they have changed the business.
Why: Heavy broker involvement may mean the operations, economics, or seller behavior have already been materially altered.
The seller started the lending business from scratch about 10 years ago, built a $7 million equity book and $15 million in managed capital, and now wants to cash out to buy hunting land. The hosts used that motivation to argue the seller may be willing to structure the deal creatively.
Lesson: Seller motivation can create a path to an asset-light structure that reduces buyer capital needs.
The broker’s unusually long BizBuySell description revealed that the seller spends about five months a year gold mining in Alaska and that the broker had pushed major changes to the business. The panel saw that as a clue that the listing may already be heavily managed or partially normalized for sale.
Lesson: A broker’s over-explanation can signal hidden complexity or a business that has been shaped to look cleaner than it really is.