Terms on Approval

STRAIGHT DEBT OPTIONS
(Painful, but familiar. Control stays with the owner.)

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1. Senior Secured Term Loans
• First-position security on assets             • Often tied to real estate, hard inventory, or strong cash flow             • Rates typically 8%—14%
                              • Used when the dealership is bruised, not bleeding out
Common outcome:  Business stabilizes, refinances later with cheaper money, lender exits cleanly.

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2. Asset-Based Lending (ABL)
• Borrowing base tied to inventory, receivables, sometimes equipment             • More forgiving on credit quality               

                              • Rates 10%—18% plus monitoring fees
Seen in the wild:  Business survives the slow season, inventory gets right-sized, ABL rolls into conventional financing later.

 

3. Bridge Loans / Rescue Capital
• Short-term, high-risk money             • Designed to buy time, not comfort             • Rates 15%—25%             • Often interest-only with fees
The hard truth:  This is “stop the bleeding” money. It leads to restructuring or a controlled exit.

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HYBRID DEBT CONTROL—ADJACENT STRUCTURES
(Where lenders start watching closely.)

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4. Mezzanine Debt
• Sits behind senior lenders, sometimes unsecured             • Higher rates 12%—20%             • Often includes warrants or conversion features
What lenders are thinking:  “If this works, great. If not, I want upside or leverage.”
 

5. Payment-in-Kind (PIK) or Deferred Interest Loans
• Interest accrues instead of being paid monthly             • Used when cash flow is temporarily crushed
                             • Rates look high on paper, but cash relief matters
Anticipated outcome:  Business survives a bad year, pays later when operations normalize.
 

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EQUITY & PARTNERSHIP CAPITAL
(This is where dignity meets reality.)

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6. Minority Equity Investment
• Investor buys a non-controlling stake             • Capital injected for working capital, debt paydown, or growth reset
                              • No fixed interest rate, return via dividends or exit
Seen most often:  Strong operator, weak balance sheet. Investor bets on the person, not the paper.
 

7. Structured Partnerships
• Investor provides capital + strategic support             • Profit participation instead of pure interest

                              • Sometimes region-specific or brand-specific

Typical structure:  Preferred return + revenue share until capital is repaid, then equity upside.
 

8. Convertible Debt
• Starts as a loan             • Converts to equity if targets aren’t met or at investor’s option             • Rates 10%—18% until conversion
Why it shows up:  Lender likes the business but doesn’t trust the timing.
 

CONTROL—SHIFTING OPTIONS

(Used when survival beats pride.)

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9. Buy-In / Buy-Down Offers
• Lender offers to acquire part of the dealership             • Often triggered by covenant breaches or repeated renewals
                              • Can preserve the dealership and jobs
The end result:  Original owner keeps operational role, loses some ownership, business lives.
 

10. Buy-Out with Operator Retention
• Capital provider acquires majority or full ownership             • Previous Owner stays on as GM or minority partner
                              • Salary + earn-out replaces ownership risk
Harsh, but honest:  Better than liquidation. Often saves the brand and the community presence.

 

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EXIT—ADJACENT FINANCING

(Not failure, just reality.)

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11. Orderly Wind-Down or Transition Capital
• Funds inventory liquidation, creditor settlements, or store consolidation             • Short-term, tightly controlled
Most seen outcome:  Owner exits cleanly instead of getting dismantled by creditors