Signals of Interest from Acquisition Financing Lenders

Posted on: February 28th, 2025

acquisition-financing

Acquisition financing lenders are constantly bombarded with a high volume of new deals promising low risk and high returns. Due to the sheer number of deals that acquisition financing lenders see, they must screen aggressively to find deals that are worth their time and resources. First time borrowers of acquisition financing often expect their deal to be greeted with high enthusiasm by the market, only for it to land with mixed interest.

Decoding Lender Interest in Acquisition Financing

In this scenario, there are lenders with interest, but they are not overly excited about the deal to the point where their interest is obvious. Their interest may be more matter of fact, and low-key. They do not want to tip their hand too early lest they turn over their cards, reducing their ability to optimize their pricing opportunity. Early-stage interactions between acquisition financing lenders and borrowers are a classic information asymmetry negotiation. A borrower must understand the finer points and subtleties of the acquisition financing lender’s communication style to gauge their real interest in the deal. There are a number of standard signals of interest that acquisition financing lenders flash in the early stages, which will help you know where you stand. They include the following:

They say the deal is interesting. Lenders use this word to say that we find your deal worthy of time and effort. This is a tip-off to the fact that they like what they see so far.
They respond quickly. The faster they get back to you, the more they are internally prioritizing the deal.
They say it has similarity to another successful deal they did. Lenders are creatures of habit and like consistent industries and deal types in their portfolio.
They ask you how many lenders you are going out to in your process.
They call you out of the blue and ask probing questions to fill out deal context.
They describe the intangible benefits of doing business with them and how they can help you over the long term.
They put a team together internally to review the deal at an early stage.

Like all businesses, mezzanine debt lenders have two distinct components to their business models, consisting of a front end and a back end. On the front end, they market and sell their loans to companies in need of capital. This involves conventional sales processes where the mezzanine debt lenders are nice to the prospective borrower.

Acquisition financing is frequently viewed through a transactional lens, without much focus on the attributes of the different type of providers. Often a buyer under focuses on the qualities of the acquisition financing provider, and cares solely whether they can deliver the loan and close.