Terms

Terms on Approval

STRAIGHT DEBT OPTIONS

(Painful, but familiar. Control stays with the dealer.)

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:
Dealer stabilizes, refinances later with cheaper money, lender exits cleanly.

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:
Dealer 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.

HYBRID DEBT / CONTROL—ADJACENT STRUCTURES

(Where lenders start watching closely.)

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:
Dealer survives a bad year, pays later when operations normalize.

EQUITY & PARTNERSHIP CAPITAL

(This is where dignity meets reality.)

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.)

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

Dealer 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.

EXIT—ADJACENT FINANCING

(Not failure. Just reality.)

11. Orderly Wind-Down or Transition Capital

Funds inventory liquidation, creditor settlements, or store consolidation

Short-term, tightly controlled

Most seen outcome:
Dealer exits cleanly instead of getting dismantled by creditors.

WHAT I’VE SEEN HAPPEN AFTER THE MONEY LANDS

(This part matters.)

Lenders tighten reporting, then relax it once trust is earned

Some lenders graduate into equity partners after seeing real performance

A few lenders eventually roll their debt into ownership and bring in professional management

Best cases end with:

Refinancing at lower rates

Ownership preserved

Reputation intact

The worst cases still end better than doing nothing.

THE UNCOMFORTABLE TRUTH

At 8%—25% interest, lenders aren’t villains. They are pricing uncertainty, timing,

and human behavior.
The right structure matters more than the rate.

Bad money kills dealers; expensive but correctly structured money saves them.

That’s the game.

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