1. The instruments — at a glance
| Instrument | Typical use | Cost band | Term |
|---|---|---|---|
| Senior bank debt | Acquisition, real estate, equipment | P + 1–3% | 5–10 yr |
| SBA 7(a) | Lower-middle-market acquisitions < $5M EV | P + 2.75% | 10 yr |
| Mezzanine debt | Fill the gap above senior, below equity | 10–14% | 3–7 yr |
| Preferred equity | Real estate & growth equity | 8–12% pref | 3–5 yr |
| Revenue-based | D2C, SaaS, seasonal operators | 1.2–1.5x | 12–36 mo |
| Asset-based | Inventory, A/R, equipment | P + 2–5% | Revolving |
| BLOC (revolving) | Working capital, payroll bridge | P + 1–4% | Revolving |
| Term loan | One-shot project capital | P + 2–5% | 1–7 yr |
| SPV / Reg D 506(c) | Pool LP capital for one deal | Equity | Deal-life |
Rate ranges are illustrative midpoints from market activity over the last 24 months. Actual pricing is borrower-, sponsor-, and structure-specific. P = Wall Street Journal Prime.
2. BLOC vs term loan — the right tool for the right job
A BLOC is revolving and pays for cash-flow timing mismatches — inventory cycles, payroll bridges, receivable gaps. A term loan is one-shot and pays for a defined project — an acquisition, a buildout, an equipment purchase. Using one in place of the other almost always creates either a covenant problem (revolver used for a long-term asset) or an interest-cost problem (term used for working capital).
3. Acquisitions — the typical stack
| Deal size | Typical structure | Sponsor equity |
|---|---|---|
| < $5M EV | SBA 7(a) + seller note | 10–20% |
| $5–25M EV | Senior bank + seller note + sponsor equity | 20–30% |
| $25–100M EV | Senior + mezz + sponsor equity | 25–40% |
| $100M+ EV | Senior + unitranche or 1L/2L + LP equity | 30–45% |
4. Real-estate capital stack
A typical multifamily or commercial deal funds across four layers: senior debt (60–75% of cost, agency or bank), mezz / pref equity (5–15% above senior, more expensive but cheaper than common equity), common equity (sponsor + LP), and sponsor promote (carried interest above a hurdle). Mezz is a relationship market — line it up before the LOI is signed, not after.
5. SPVs — what they actually do
An SPV is a single-purpose LLC (or series-LLC) created to hold one asset, run one deal, or pool capital for one investment. It exists to ring-fence liability, isolate cash flows, and give multiple investors a clean point of participation. Reg D 506(b) limits to non-publicly-solicited accredited investors; Reg D 506(c) allows general solicitation but requires verified accreditation. Delaware (LLC + Series LLC), Wyoming, and Cayman are the most common jurisdictions; DIFC, ADGM, JAFZA, and IFZA are common cross-border alternatives.
6. Soft vs hard pre-approval
A soft pre-approval is an indicative read — the lender has eyeballed the headline file and confirmed the deal is in their box. Not a commitment. A hard pre-approval (commitment letter) is underwritten through credit committee with a defined list of conditions. Know which one you have before you sign an LOI.
7. The 30-second self-test
- Cash flow pattern. Is this funding a one-shot project (term loan / mezz) or a recurring timing gap (BLOC / RBF)?
- Asset coverage. Is there a hard asset (real estate, equipment, A/R) that can secure the facility cheaply?
- Sponsor profile. Personal guarantee acceptable? Audited financials available? Prior deal track record?
- Time to close. 30 days (RBF, asset-based) vs 60–90 days (SBA, senior + mezz)?
- Investor pool. If equity is involved — is this a friends-and-family round, a 506(b) syndication, or a 506(c) general solicitation?