The Post-LOI Financing Gap

In brief

Every acquisition has a moment where the capital structure is still a blank page. For a sponsor, that moment is managed: a deal team runs the debt like a process, lenders get a book, term sheets come back, someone picks.

For an owner-led buyer, the blank page lasts about a month.

The LOI gets signed. The exclusivity clock starts, and in the lower middle market nobody closes in under 90 days, while asking for more than 120 is treated as excessive (Benchmark International). The diligence request list arrives in week one. If there is no first draft of the purchase agreement by day 30, the deal is likely dead. Somewhere inside those 30 days, the buyer's CFO has to answer one question: how are we paying for this?

He answers it with whoever is already in the room.

Three parties are always in the room. None of them is you.

Ockers Technologies is what the default path looks like. A 105-year-old, family-owned technology provider in Middleborough, Massachusetts, it recently acquired companies in Lancaster, MA and Ladson, SC. In August 2026, Salem Five, a regional bank, announced a $15M senior facility for Ockers, a revolver plus a commercial real estate loan, with strategic acquisitions named as a use of the money (Salem Five press release, August 12, 2026). An owner-led acquirer, mid-roll-up, financed by a regional bank's business credit team.

That is not a failure of the buyer. It is the rational move inside a 30-day window. The cost lands somewhere else.

Most direct lending origination is built around one assumption: good deals arrive through a process. A sponsor or an advisor packages the credit, sends it out, and the lender competes on terms.

The honest version is narrower. That assumption is true for the sponsored half of the market. For the strategic half, there is often no process to arrive through. The capital structure gets settled by the house bank in the first month, and whatever the bank will not cover gets plugged by the seller.

Look at what that means for the 34%.

A declined cash-flow request is not a dead deal. The buyer still has a signed LOI and a 90-to-120-day clock. The deal still needs to close. So the gap gets filled with the tool that is already at the table, and seller financing shows up in a mean 54% of closed deals. In many of them, the seller ends up the lender because nobody else was asked in time.

Those are precisely the credits a direct lender is built for: real companies, real acquisitions, a bank that said no, and a gap a unitranche exists to fill. They are also the deals a lender is least likely to see, because the moment they become visible (an announcement, a closing, a press release) the capital structure is already done.

Take 100 owner-led buyers who bring a cash-flow acquisition loan request to their house bank.

• At Pepperdine's 34% decline rate, 34 walk out without it.
• Each still has a signed LOI and roughly 90 days to close.
• Assume, for illustration, a $20M senior need per deal. That is 34 × $20M = $680M of acquisition debt with a deadline and no lender.

Now price one of those deals at today's market. Unitranche spot yields sat at 9.33% to 10.08% at the end of Q3 2026 (VRC, as of September 30, 2026), with new originations levered around 4.8x to 5.3x EBITDA.

• $20M × 9.33% = $1,866,000 a year.
• $20M × 10.08% = $2,016,000 a year.
• Over a 5-year term, before amortization and fees: $9.3M to $10.1M of gross interest income on a single deal.

The lender who sees that deal in week two of exclusivity is competing against a seller's note and a buyer under time pressure. The lender who sees it at the closing announcement is competing against nothing, because there is nothing left to compete for.

Same deal, same borrower, same credit. The only variable is when you heard about it.

1. Move your origination clock to the LOI, not the process. For owner-led buyers, the process is the first 30 days after signing. If your first touch is a teaser, you are already late.
2. Treat a bank decline as a lead, not a verdict. A 34% decline rate on cash-flow requests means a steady supply of acquisitions that still have to close after the bank says no.
3. Price against the seller's note, not against other direct lenders. In these deals the alternative is the seller carrying paper and the buyer giving up terms to get it. That is the comparison your term sheet needs to win.
4. Be able to say yes inside two weeks. In a 90-day deal with drafts due by day 30, a lender that needs six weeks to issue terms is structurally out of the deal, however good the pricing.
5. Write your box for strategics, not just sponsors. An operating company buying a competitor has no deal team to translate your criteria. The clearer your box reads to a CFO, the sooner you get the call.

• Citizens, 2026 M&A Outlook (released January 6, 2026). Survey of 276 U.S. companies with $25M to $1B in revenue, fielded November 2025. Business Wire release
• Pepperdine Graziadio Business School, 2026 Private Capital Markets Report (Craig R. Everett, June 2026; survey deployed January 2026). Investment banker survey, n=43: buyer mix and deal-closing tools (Figure 53, mean % of deals). Bank survey, n=13: Table 6 rates and terms, Table 11 decline rates as a percentage of decided loans. Full report
• Benchmark International, timing expectations from LOI to close (August 2019). Practitioner benchmark for lower-middle-market deal timelines. Article
• Federal Reserve, Senior Loan Officer Opinion Survey, July 2026 (responses due July 2, 2026). Survey
• Valuation Research Corporation, Private Market Trends Q3 2026. Unitranche spot yields and leverage of 2025 to 2026 originations, as of September 30, 2026 and June 30, 2026. Report
• Salem Five Bank, press release on Ockers Technologies' $15M senior credit facility (August 12, 2026). Release

Method and limits. Bank and banker figures come from Pepperdine's survey samples (13 bank respondents, 43 investment bankers) and describe respondents' own books, not the whole market. Bank rates reflect a January 2026 survey, while unitranche yields are as of September 30, 2026, after a September rate increase, so the two are not directly comparable and are not used against each other. The Benchmark timeline dates from 2019 and is used as a practitioner benchmark, not a measured statistic. The $20M deal size in Section 4 is an illustrative assumption; every other input is sourced. Interest income is gross, before amortization, fees, and losses. This piece is for discussion only and is not investment advice.

About OmniQlick

OmniQlick identifies capital events in the middle market before they become broadly intermediated, and introduces lenders, advisors, and acquirers while the situation is still open.

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