Two capital stacks.

The capital stack you sign at close is the capital stack you live with for the first eighteen months. The capital stack you build at month eighteen is the capital stack that funds the next platform.

Plan both, the day the LOI gets signed.

The platform closes at month zero. The integration of the first add-on happens at month six. By month twelve the operating data is real. By month fifteen the senior lender's quarterly reviews have become routine. By month eighteen the platform's EBITDA has grown and the original senior facility, priced for the entry deal, is meaningfully over-collateralized.

Most independent sponsors do not refinance at month eighteen. They wait until month twenty-four or thirty-six because "the platform is working, why fix what is not broken." That is the wrong frame. The platform is working is the reason to refinance.

A refinancing at month eighteen, with eighteen months of operating data showing EBITDA growth, accomplishes four things at once.

First, it lowers the cost of capital. The original senior at SOFR plus 575 gets replaced by senior at SOFR plus 425, possibly less. On a $25M senior facility, that is roughly $375K per year of interest savings.

Second, it expands the leverage. EBITDA has grown from $7M at entry to (say) $10M at month eighteen. The new senior facility at the same leverage multiple of 3.0 turns is $30M instead of $21M. That is $9M of fresh capital.

Third, it loosens the covenants. The original facility had tight covenants because the platform was new. The refinanced facility has looser covenants because the platform has a track record.

Fourth, it changes the lender relationship. The original senior lender, who priced the entry deal and held the leverage tightly, is replaced by a new senior lender who is competing for the relationship.

The independent sponsor who is thinking about month eighteen the day the LOI gets signed builds the entry capital stack with the refinancing in mind:

No-call period of 12 to 18 months, not 24. Covenants with a step-down provision after 12 months of compliance. $5M to $10M accordion built in. No make-whole provision on the senior.

The capital stack is not the deal that closes. The capital stack is the operating system that runs the platform for the next four to seven years. Build it for what comes next, not just for what closes.