How LTV Capital Works · A real deal, in plain English

One example, structures vary

We're buying a $2M business.

This is one representative deal from the pipeline. Every acquisition is structured differently depending on the target, the operator, and the cash profile. The example below makes $1M of profit a year. We acquire 70%, the founder keeps 30% (rolled equity, no cash needed). Here's exactly how the cash moves at close.

The cash stack

What it costs vs. what we actually pay.

The total deal value is $2M, but most of that is paid by the lender, the business itself, and the founder's rolled equity. LTV's actual cash cheque at close is small.

Total deal valueThe whole business

$2,000,000

Founder rolls 30%Equity, not cash. The founder stays in the business.

$600,000

LTV buys 70%Of which: 60% cash at close, 40% earnout

$1,400,000

Earnout (40%)Paid out of the business cash flow over 18 months

$560,000

Lender funds the cash closeRevolving facility at 65% LTV, drawn only when we close. Paid back monthly from business profit.

$840,000

LTV cash actually wired at closeRoughly 0 to 10% of the deal, depending on structure

$0–200K

Translation: on a $2M deal, LTV is risking somewhere between 0 and 10% of our own cash at close. The lender's loan is paid back by the business it just funded. The founder keeps real skin in the game. The earnout pays itself. And because the senior tranche is revolving, we only draw when we close, no interest paid on idle cash. No cash drag, no carry on undeployed capital.

How the lender gets paid

For every $1 we owe the lender, the business makes $2 or more.

That ratio is called DSCR (debt service coverage ratio). It's the single most important number in a credit deal. Bigger is safer for the lender.

1.0×

$1.00

Of profit for every $1 owed. Zero cushion. Every dollar the business makes goes to the lender. We never close a deal at this level.

1.5× · Floor

$1.50

Of profit for every $1 owed. The portfolio-wide minimum we promise the lender. Hit only if multiple deals deteriorate at once.

2.0× · Target

$2.00+

Of profit for every $1 owed. Our day-one underwriting target on every individual deal, before any post-close growth.

Why this matters: we only close deals where the business already generates twice what we owe. The lender is paid first, automatically, every month, out of cash flow that exists today, not cash flow we hope to grow into.

If a deal goes wrong

The lender is fifth in line for any loss.

Four full layers of capital sit between a bad deal and the lender losing a single dollar. Here is the order, from first dollar lost to last.

Founder rolled equity

The founder kept 20–40% of the business as equity, not cash. They lose this stake before anyone else.

~$600K on a $2M deal

LTV deal equity

The 10–20% of deal value LTV puts in per acquisition. Wiped out next.

~$200–490K per deal

LTV holdco cash reserve

$1M held at the holdco, sitting there as a portfolio-level backstop. Not earmarked, not deployed, available on day one.

$1M

Cross-collateral from the rest of the portfolio

Every other deal in the facility backs every other deal. Strong assets carry weak ones.

Variable

The lender

Last in the loss waterfall. First charge on assets, IP, and domains. Cash sweep on any excess cash flow above the DSCR threshold.

5th

On top of that: no cash distributions to LTV equity until portfolio DSCR exceeds 2.0×. Concentration cap of 35% per deal. The lender is structurally protected before the deal is even signed.

Cost of capital, honest

We have a signed facility at 11%.

$500K, signed, drawable on demand, undrawn until we close the in-flight acquisition. That's our market-tested reference rate. The $10M portfolio facility is sized to bring the blended cost of capital down by spreading risk across multiple deals. If the structure can't get there, we'll draw at 11% and stack from there. We'd rather get the structure right than the rate right.

Already secured

$500K

at 11%, signed, undrawn, drawable on demand

Now raising

$10M

cross-collateralised portfolio facility, target sub-11%

The math, in plain English.