You Found the Deal on Axial. Here Is How the Money Gets Raised (2026)
by Raises.com
A deal found on Axial gets paid for in layers, and the lender sizes the layers before any investor sees the deal. On 2026 lower middle market acquisitions, lenders put senior term loans at about 3x EBITDA, wanted a debt service coverage ratio of 1.0 at minimum with a buffer at 1.15, and asked the buyer to show 10 to 20% of the purchase price in net worth or liquidity. Private credit added junior money at 10 to 12% of yearly revenue, priced at 12 to 15%. On a July 2026 Texas HVAC deal, a seller note plus rollover equity closed what was left. The equity layer needs a vehicle before anyone wires: a fund or SPV, a private placement memorandum, a subscription agreement, an operating agreement, a financial model and a data room. And the Axial success fee is part of the bill, about $188,600 on the $8.86M average independent sponsor close.
This page picks up where Axial stops. The advisor has sent the teaser, the numbers look right, and a letter of intent is close. The lender figures below come from the Raises.com podcast capital markets episode with Tre Brown, Head of Capital Markets at Raises.com, on the lender conversations behind client deals, and from published client transactions. They describe what lenders asked for in 2026. They are not a promise of financing.
The capital stack, by layer
| Layer | What lenders asked for on 2026 deals | What it means for an Axial deal |
|---|---|---|
| Sponsor equity | 10 to 20% of the purchase price in net worth or liquidity | On the $8.86M independent sponsor average, $886,000 to $1.77M |
| Senior term loan | About 3x EBITDA | Sized off earnings, never off the price |
| Asset-based facility | 70 to 80% against heavy assets | Equipment and inventory can carry a second senior piece |
| Private credit | 10 to 12% of yearly revenue, priced 12 to 15%, junior and unsecured | Sized on revenue, so it can exist where margins are thin |
| Coverage | DSCR of 1.0 at minimum, buffer at 1.15 | Test it on the seller's numbers before the LOI |
| Seller paper | A seller note plus rollover closed the gap on a July 2026 Texas HVAC deal | Negotiate it in the LOI, not after |
| Timeline | The lender on that close quoted three weeks and took two months | Plan the Axial notices and fee around the slower date |
Read the table from the top down, because that is the order a lender reads it. The senior loan is the cheapest money in the stack, and the lender sizes it first. Everything above it, the private credit, the seller note, the rollover and the investor equity, exists to fill the space between what the bank will lend and what the seller will accept.
Three tests before the LOI
These three tests use numbers the advisor already sent in the CIM. Each one can end a deal in financing, and each one is visible before you sign an LOI.
1. The margin test. Banks underwriting a business of roughly $5M wanted EBITDA at 30 to 40% of revenue. Below that band the deal is still financeable. It moves away from a plain term loan toward asset-based or revenue-based money, which costs more. Put the margin in the model before you put a price in the LOI.
2. The coverage test. DSCR is the cash the business earns divided by the debt payments it owes over the year. At 1.0 the business exactly covers them. Lenders on 2026 deals wanted a buffer at 1.15, so a soft quarter does not trip a default. Run it on the seller's trailing twelve months with your proposed debt. If it misses, the fix is price, structure or more equity, and all three are cheaper to negotiate before the LOI.
3. The MCA test. Look for merchant cash advances on the target's books. On 2026 deals they ran at effective rates of 30%, and sometimes 50%. A seller who took one after a bad quarter is still a seller. The advance becomes a line to retire at close, in the sources and uses, and it changes the coverage math the day you own the company.
A deal that passes all three has a lender conversation worth starting. The benchmarks behind these tests are collected on acquisition financing benchmarks 2026.
Axial's clock runs alongside the lender's
An Axial deal carries two deadlines that a deal from your own outreach does not.
First, Axial's terms require notice within five days of any letter of intent, term sheet or indication of interest on a deal it sent you, with the material terms. Send it the week you sign the LOI.
Second, the success fee falls due on the earliest of four events, and the first is the mutual execution of transaction documents. On the published schedule that is 5% of the first $1M of transaction value, falling to 1% above $4M: about $188,600 on an $8.86M deal. Transaction value includes seller notes and earn-outs, so the seller paper in the table above does not reduce it.
Put the fee in the sources and uses as its own line. Ask the lender early whether loan proceeds may pay it. The details, including the 18-month tail and late-payment terms, are on Axial pricing and membership cost.
Sources and uses for an Axial deal
Every line of the capital stack lands in one table, and the two columns have to match to the dollar before closing. Here is the template, with the 2026 benchmark beside each line.
| Uses | Note |
|---|---|
| Purchase price | The enterprise value in the LOI |
| Axial success fee | Published schedule; about $188,600 at $8.86M; due at the earliest trigger |
| Merchant cash advance payoff | Only if the target carries them; they ran at 30%, sometimes 50% |
| Quality of earnings | Required on an SBA initial acquisition priced at $3M or more from October 1, 2026 |
| Legal and structuring | Counsel, the vehicle and the offering documents |
| Working capital | The cash the business needs on day one |
| Sources | 2026 benchmark |
|---|---|
| Senior term loan | About 3x EBITDA |
| Asset-based facility | 70 to 80% against heavy assets |
| Private credit | 10 to 12% of yearly revenue, priced 12 to 15% |
| Seller note | Negotiated in the LOI; on an SBA deal it counts as equity only on full standby, inside the limited half |
| Rollover equity | The seller stays invested, as on the July 2026 Texas HVAC close |
| Investor equity, through the SPV | Whatever gap the debt and the seller paper leave |
| Sponsor equity | 10 to 20% of the price in net worth or liquidity, shown to the lender |
The Axial fee is the one use that appears on no lender term sheet and no seller LOI. It has to be added by hand. So does the payoff of any merchant cash advance, which shows up in the seller's bank statements long before it shows up in a conversation.
What has to exist before an investor wires
If investor equity is part of the stack, and for a fundless sponsor it usually is, investors need something to wire into. Six things, in the order they get built.
- The vehicle. An SPV for one deal, or a fund for several. Investors own a share of it, and it holds the investment in the company.
- The private placement memorandum. The disclosure document: the deal, the risks, the terms, the use of proceeds. It is drafted with securities counsel.
- The subscription agreement. What each investor signs to commit capital and confirm eligibility.
- The operating agreement. How the vehicle is governed: distributions, fees, voting, what happens on a sale.
- The financial model. The same model the lender underwrites to: sources and uses, including the Axial fee, the debt schedule, coverage by year and investor returns.
- The data room. The seller's financials as the NDA allows, the model, the documents, and the diligence as it lands.
Axial's terms shape this step too. They let you share deal information with investors and service providers for evaluating and negotiating the deal; anything wider needs Axial's authorization. And the fee applies whether the deal closes through your own account, an affiliate, or "an entity created for the purpose of participating in investments," which is exactly what an SPV is. Check the seller's NDA before the CIM goes anywhere near an investor.
Order matters because investors and lenders read each other's paper. A lender wants to see the equity is real. An investor wants to see the debt is committed. A model and data room built once, for both audiences, is what lets the two conversations run at the same time.
Raises.com builds this part. It does not source deals, and it does not replace your counsel. It forms the fund or SPV, produces the private placement memorandum, subscription agreement and operating agreement, builds a CFA-reviewed model and the data room, then introduces debt and equity. See how Raises.com funds business acquisitions, or the side-by-side on Axial vs Raises.com.
SBA 7(a) buyers: the October 1, 2026 rule
Some Axial deals are small enough for an SBA 7(a) loan, which tops out at $5,000,000 for a standard loan. SBA Information Notice 5000-880695, published August 14, 2026, issued SOP 50 10 8.1. It applies to applications that receive an SBA loan number on or after October 1, 2026. Changes of ownership now sit in Appendix 15. Four parts matter to a buyer.
- Equity injection. An initial acquisition needs at least 10%, and SBA says it cannot be reduced or eliminated.
- Limited sources. Standby debt, seller debt on full standby and non-controlling minority equity are Limited Equity Injection Sources. Individually or together, they may provide no more than half of the required injection. A non-controlling investor holds less than 20% and exerts no control.
- Coverage. An initial acquisition must show a debt service coverage ratio of 1.25:1.
- Quality of earnings. An initial acquisition or business expansion priced at $3M or more needs a quality of earnings report on top of the business valuation.
The practical effect falls on how the equity is raised. Passive minority investors count toward the limited half only. At least half of the required injection has to come from unlimited sources, such as cash that is not borrowed. A sponsor planning to fund the whole injection from a group of small outside investors and a seller note will need a different mix on an SBA deal after October 1.
A worked sequence
| Stage | What gets done | Who it satisfies |
|---|---|---|
| Before the LOI | Margin, coverage and MCA tests on the CIM numbers; price and seller paper sketched | You |
| LOI signed | Notice to Axial within five days; lender conversations opened | Axial, the lender |
| Term sheet | Senior size set, about 3x EBITDA on the 2026 deals; the equity gap becomes a number | The lender |
| Vehicle and documents | SPV or fund, private placement memorandum, subscription and operating agreements, model, data room | Investors |
| Raise | Equity commitments against the gap; seller note and rollover finalized | Investors, the seller |
| Signing and close | Axial fee due at the trigger date; notice to Axial within five days of closing | Everyone |
Leave slack in every row. The lender on the July 2026 Texas HVAC close quoted three weeks and took two months, and nothing else in the sequence could close without it.
Frequently asked questions
How much equity do I need to buy a business I found on Axial?
On 2026 lower middle market deals, lenders asked buyers to show 10 to 20% of the purchase price in net worth or liquidity. On an SBA 7(a) initial acquisition from October 1, 2026, the minimum equity injection is 10%, and limited sources can provide no more than half of it.
Can investors fund the equity on an Axial deal?
Yes, through a vehicle such as an SPV or fund, with a private placement memorandum, a subscription agreement and an operating agreement in place before they wire. On an SBA deal, non-controlling minority investors count only toward the limited half of the required injection.
Does the Axial fee count toward the purchase price?
It is a separate use of funds. Axial's fee is calculated on transaction value, including seller notes and earn-outs, and falls due at the earliest trigger, which can be the signing of transaction documents. Budget it as its own line.
Can a seller note close the gap?
It did on a July 2026 Texas HVAC close, together with seller rollover equity. Under SBA's SOP 50 10 8.1, seller debt counts as equity injection only on full standby, and only within the limited half. Outside SBA it is a negotiation with the seller and the senior lender.
Where do I find more deals like this one?
Axial and nine alternatives are compared, with published pricing, in Axial alternatives, and Axial itself in the Axial review. To work through the capital on a specific deal, book a strategy call.
Sources
Web sources read on September 22, 2026.
- Lender figures: the Raises.com podcast capital markets episode with Tre Brown, Head of Capital Markets at Raises.com; collected on acquisition financing benchmarks 2026
- July 2026 Texas HVAC transaction: https://raises.com/podcast/cody-sechelski-texas-hvac-rollup
- Axial buyer pricing: https://www.axial.net/how-it-works/buying-investing/
- Axial terms of service, updated July 20, 2023: https://www.axial.net/legal/terms/
- Axial February 2026 buyer report: https://www.axial.net/forum/whos-buying-in-the-lower-middle-market-in-2026-key-buyer-trends-from-axial-data/
- SBA Information Notice 5000-880695, Issuance of SOP 50 10 8.1: https://legacy.sba.gov/document/information-notice-5000-880695-issuance-sop-50-10-81
- SOP 50 10 8.1, Lender and Development Company Loan Programs: https://legacy.sba.gov/document/sop-50-10-lender-development-company-loan-programs