2026 Guide: First Position Equity in Business Acquisition, What Every Buyer Must Know
by Raises.com
First position equity means investors hold the primary claim on the assets of a deal, giving them the highest level of protection if the business defaults. When you raise capital for a $10 million acquisition, pairing a senior debt loan with first-position equity lets you secure the lender and attract equity partners who feel safe.
Key Lessons from the Video
- Step 1, Assess Senior Debt Capacity: Lenders typically finance up to 50% of a $10 million purchase price when the target has solid real-estate collateral or strong EBITDA.
- Step 2, Secure First-Position Equity for the Remainder: The other 50% should be raised as equity that sits in the first lien position, giving investors priority over any later equity.
- Step 3, Prioritize Cash-Flow Assets: Focus on businesses that generate high earnings before interest, taxes, depreciation and amortization (EBITDA) because they are easier for lenders to finance.
- Step 4, Use a Commercial Mortgage Brokerage: A brokerage can guarantee part of the debt, improving lender confidence and speeding up the loan process.
- Step 5, Protect Equity Investors with First-Position Structure: By placing equity in the first position, you reduce investor risk and can attract capital at more favorable terms.
Debt vs. Equity Comparison
| Feature | Senior Debt (First Lien) | First-Position Equity | Second-Position Equity |
|---|---|---|---|
| Claim on Assets | First lien on all assets | First claim among equity holders | Subordinate to first-position equity |
| Risk to Investor | Low, secured loan | Medium, equity but priority claim | High, last in line |
| Typical Return | Fixed interest (5-10%) | Preferred return (8-12%) plus upside | Higher upside (15%+), higher risk |
| Typical Use | Cover 40-60% of purchase price | Fund remaining equity, provide security | Supplement capital when first-position equity is full |
| Regulatory Oversight | Standard loan regulations | Accredited-investor protections, disclosure | Stricter securities compliance |
Applying the Lessons to Your Acquisition
1. Run an EBITDA analysis to confirm the target generates enough cash flow for a senior loan.
2. Approach lenders and request up to 50% financing, highlighting real-estate collateral.
3. Draft a first-position equity term sheet covering the remaining 50% of the purchase price.
4. Use Raises.com to create the SPV, private placement memorandum, subscription and operating agreements, and to build a data room and pitch deck.
5. Close the debt and equity rounds, then complete the acquisition.
Frequently asked questions
What is first position equity?
First position equity is an investment that sits ahead of all other equity claims on a company's assets, giving investors priority in a liquidation.
How much debt can I get for a $10 million business purchase?
Lenders typically finance up to 50 % of the purchase price when the target has solid real-estate backing or strong EBITDA.
Why is equity riskier than debt?
Equity is riskier because it is paid after debt and has no lien on the assets, so investors absorb losses first.
Can I raise equity without a first-position structure?
You can raise equity in a second-position structure, but investors will demand higher returns to compensate for the lower security.
How does Raises.com help with first-position equity?
Raises.com builds the SPV, PPM, subscription and operating agreements, prepares financial pro-formas, and introduces both debt and first-position equity investors.
Next Steps
Ready to structure a secure capital raise for your next business or real-estate deal? Learn how it works and book a call with our experts today.