Scaling with Control, Private Debt vs. Equity with Robert Adams

On this week’s episode, Cole Strandberg chats with a FOCUS colleague, Rob Adams. Rob helps founders fund expansion so during this conversion they address private debt and capital raising as a deliberate growth strategy. Over the last few years we’ve watched more growth-oriented operators partner with private equity—thinking of it less as a sale and more as a strategic alliance. The question for 2026: will we see that thesis taken one step further—using private debt (the same kind of debt PE uses) to scale while retaining maximum equity and control? In this episode, they break down what private debt is, when it beats bank debt or equity, what lenders actually look for, and how to structure capital so it accelerates growth without stressing the business.

Cole Strandberg: Looking forward to an awesome conversation. The world of private debt and capital raising is one that I’ve talked about a ton and so it’s about time that we get kind of the master of that domain here to chat with us. Rob, I gave a little bit of an introduction about you at the top of this show, kind of in my canned introduction. We would love to hear your background and what you do here at Focus in your own words.

Robert Adams: Very good. Thanks Cole. I am president for Focus. I’ve been with the firm 15 years. I set up a European operation. I split my time between Europe and the US And I head up our capital raising team both sides of the Atlantic.

Cole Strandberg: Love to hear it. And a bit of an entrepreneurial background yourself. Obviously in starting Focus in Europe, you also have other investments, other things. So many of our listeners here on the Collision Vision are leaders within organizations. They’re owners, they’re founders. Certainly a story that can resonate with you. How long have you been working with kind of founder owned and led businesses and what do you like most about that?

Robert Adams: Yeah, I’ve been working with founder owned businesses for coming on 25 years. What I really like is entrepreneurs and the appetite they have to grow their businesses. As you mentioned, we started Focus in in Ireland 15 years ago with three staff, four staff and now we have 50 staff. So we’ve gone on that journey ourselves. We’ve kind of brought in like minded people both to the US business and the European business. And a lot of our people have come from entrepreneurial backgrounds and have run businesses themselves. So when they’re talking to our clients, they know how that person feels sitting in their shoes, no question.

Cole Strandberg: Where do you spend your time these days, Rob? I know it’s all over the place, but how would you break it down?

Robert Adams: I’d probably say 50, 50 between Europe and the US and in Europe, a bit in London, a bit in Ireland and the US Right throughout. Wherever, wherever our clients sit.

Cole Strandberg: Beautiful. So private debt, I want your kind of definition and explanation of what exactly that is. It’s something that I’ve begun to preach and educate on a fair bit both on the podcast and beyond. When I look back at our family’s business, we went the private equity route. Private debt was not exactly a term that we were familiar with. And I do wonder, knowing what I know now, if that might have been something we explored. So in this plain English as possible, talk to me about what exactly private debt world is.

Robert Adams: I will. So debt has two forms. So the first form is your bank debt. And in banks you’ve got regional banks and you’ve got national banks in the U.S. so your regional banks will handle smaller levels of exposure. So think up to 25, 35 million of exposure and your international, or, sorry, your national debt providers will only generally deal with businesses with in excess of 30, 40, 50 million of EBITDA, not revenues. So you’ve got a gap in the middle and a large part of that gap is filled by private credit. So private credit is just lending, but not by a bank, but by a private equity, a division of a private equity firm. So they’ll give you different types of loans. So the standard loan is a term loan like you can get from any institution. They’ve got asset based lending which is lending on the back of assets like equipment that you might have or receivables that are in your business. And then you have normal, let’s call it cash flow lens that are purely on the back of the cash flows that your business are generating. And you’ve got secured lending which could be based on either an ABL or an asset based lending or physical real estate within the business. So all of that is different products offered by private credit.

Cole Strandberg: I love it. We’re going to get a little bit deeper into the details, but how do you view folks in the collision repair realm? For sure, we talk a lot about private Equity who should be talking about private debt or how should we be viewing the comparison and the contrast of those two different vehicles?

Robert Adams: Yeah, so what I would say is private equity and sometimes you’ll mix private equity with private debt. Not mutually exclusive. So private debt is good for businesses that can see what they would like to achieve in the next few years. They’re not over over levered on their balance sheet. So again depending on whether they own the real estate or whether they lease the real estate, your normal cash flow lend on the assumption they’re leasing real estate is you can get between 4 and 5x your EBITDA easily on your balance sheet as a debt product. So if that’s enough money to get you where you’re going, well then I would say private credit is a good option for you. If that’s not enough money for where you’re going, you may need some private equity and private debt. And don’t forget, as you make acquisitions, even in the collision repair every time you acquire or build something new into your business, all of a sudden their EBITDA now becomes your ebitda. So your multiple of debt goes up as you grow so you can what’s good for you today. You might be able to get more on your balance sheet in two years time after a couple of acquisitions. But it’s critical that people understand leverage needs to be repaid. Don’t over indebted your business. Make sure that the decision you’re making is sustainable.

Cole Strandberg: Beautifully put. Now back to the private debt kind of versus a traditional bank debt very publicly here over the past five maybe 10 years that has shifted in the world of private equity. Where private equity used to go to traditional banks for their loans, now more and more they’re going toward private debt. When does private debt for a business beat bank debt and when might it not? When might bank bank debt be the right avenue to go?

Robert Adams: So again I think it’s down to scale and what you’re looking for flexibility of what you’re looking for in your partner, on your credit partner. So if you’re looking for, if it’s a smaller business and they’re looking for a plain vanilla type offering which could be just a term debt at three times ebitda. That’s a good product for let’s call it a regional bank and some national banks. However if you’re looking, if you’re on high growth trajectory and you need to keep your capital within your business. So on a normal local bank, regional bank, they’ll want interest and capital repaid over A short period of time. If you go for private credit, the majority of what you’re going to look for is interest only, maybe a small bit of capital repayments. And the benefit of that is you get to recycle those cash flows in your growth within your business instead of paying down the debt. So that’s a big difference between private credit and let’s call it bank debt is bank debt. Normally want you to start repaying the day to give it to your 30 days after they give it to you. Private credit want you to pay majority of interest only with a bullet repayment at the end of five years. So you get a lot more cash within your business to fund your growth.

Cole Strandberg: Makes total sense. A little more oxygen to grow, a little more flexibility in terms of term and structure and in theory, a higher ceiling and finding the right partner to start where you need to start and ultimately take you to where you want to go. Talk to me to that note, who is a good fit? What is private debt looking for when they’re looking at an opportunity to lend to a business and essentially how big do you need to be to take advantage of this tool?

Robert Adams: Okay, so they’re looking for good businesses with a good track record. They’re looking for businesses generally with I would say 2 million plus EBITDA. That’s the lowest side of where they’re moving and, and what you need to do. So you need good financial records, historical and ideally those records should be reviewed. The larger you go, the more they need to be reviewed and in some cases audited. But I think if you’ve reviewed financial statements in a lot of cases, that’ll help. Just as regards, they’re looking for a promoter who has experience in his industry, has built the business to where it is and has a vision to take it into the future on that growth path. That’s what we’re seeing a lot of from the private credit. And as I mentioned, private credit probably goes from 10 million at the lowest point to hundreds of millions as needed. And in a lot of cases, they’re happy to grow with you as you grow your business.

Cole Strandberg: That’s the magic. Much like we talk about in private equity, that marriage and finding the right partner. The same rings true in private debt and private credit. You want to find someone who meets your needs today and can meet your wants and desires down the road. That, you know, you get to reap the rewards of some of that growth. No question about it. In terms of private debt and them evaluating opportunities with a business, I assume there’s preference in how the use of those proceeds kind of is determined whether that’s acquisition organic growth. In the case of collision repair, green fielding or brown fielding equipment. Is there a preference there? Does it really just come down to, hey, I can repay it in the future, so don’t worry about it.

Robert Adams: Again, probably one of the big differences between the banks and the private credit market is banks generally like money going into the business. Private credit isn’t, is okay with some of the money coming out of the business. So if a promoter wants to do a dividend recap as part of a solution, they can as part of their financing, take out some of that capital while the rest of the capital is funding the growth in the business. That’s probably maybe one of the other big differences between the banks and the private credit markets is the flexibility and structuring with the private credit is unbelievably different. So they’re looking forward on what you could do and should do in the future. They have a mind of what you’re doing currently, but they’ll back you on a plan going forward. In a lot of cases, the banks, rightly so, are looking backwards and they’re looking at averages for two years or three years in historical and making sure that you can afford to repay the loan as opposed to building in the growth plan. They’ll have a, they’ll sensitize that down a good bit in their own books, making sure that the business is never going to get in a difficulty. So certainly private credit can be much more flexible when they’re structuring their transactions.

Cole Strandberg: It’s an interesting spectrum because you look at like levels of conservatism in different kind of financial relationships throughout a business’s career. You got the, the commercial banks are typically going to be the most conservative. Then you have the private credit lenders are going to be kind of somewhere in the middle and then you have private equity. And we’ve done a number of these processes together. Rob and I’ve commented multiple times. It’s interesting how when you’re telling a story to a private lender, you got to keep your handcuffs on a little bit when compared to private equity. You don’t want to go out and throw out all these growth opportunities and potentially seem unfocused or potentially seem like you’re absolutely shooting for the moon. You need to show that, hey, we’re aggressive, we’re growing, but we’re going to be able to pay you back for sure. And I think it’s a really interesting mindset shift that comes with that, yeah.

Robert Adams: That’s a really good learning for entrepreneurs is that entrepreneurs are in their DNA, built to show all of the good things they’re going to do in the future with their business. And private equity loves to see that. Private credit, not so much. They’re like a structured business where they can see and bank debt. They’re like a structured, manageable business. Yes, they like to see growth into the, into the future, but managed growth as opposed to an entrepreneur where I’m going to just take my business wherever I can take it to get it to the biggest point possible. Private equity love that because therein lies opportunity and their money is coming in as equity. It’s not repayable, it’s payable when you sell the business. You don’t have a balance sheet issue coming at you like you do with private credit or bank credit. So we always tell people, you know, make sure that the story you’re telling your credit provider is very measured and achievable. Whereas your private equity guy wants to know if you got all of the money you needed, what, where could you shoot the lights out to? 2 very different. They can be the same story, but told very differently.

Cole Strandberg: Absolutely. Yep. Know your audience is really all that comes down to and know what they’re looking to get. I want to double click on a couple things you mentioned. Rob, you mentioned kind of Starting at the 2 million of EBITDA, Mark is where the private credit doors begin to open. Hit me again on some stats on, on what kind of standard leverage is going to look like. What kind of EBITDA multiple can we get out there? I’m sure that’s a bit of a range and we’ll go there.

Robert Adams: Yeah. So private credit, the multiples are generally between three and five times ebitda. So just to break down the multiples for a second, so on your senior term you have a multiple of probably between 3 and 5. With private credit, you then have a MEZ offering which is effectively almost one turn of EBITDA on top of that. And if you’re getting your senior and MES from the one provider is generally called unitranch. So somewhere between four to six times I would say is achievable in again, it’s industry specific, it’s company specific, but that wouldn’t be unreasonable in the market. Just also to say your MES rates are going to cost you a bit more than your senior. So if you’re, if you’re doing, let’s call it a vanilla senior facility with a private credit firm. Again, depending on the private credit, you can expect to pay somewhere between 5 and 7%, I would say, over cost of funds to a unit percent over cost of funds. And then if it’s, if it’s pure mez, they’re looking at kind of 10, 11 over cost on their, on their slice. And that might sound expensive, but it’s, it’s, it could be 20 of your overall exposure. So it’s not as, as expensive as that when you combine the rates.

Cole Strandberg: Sure. And I think the, the terms are every bit as, if not more important than the rates just because of that flexibility, that oxygen that that free cash represents. And talk to me too about, I think how exactly that works, where you mentioned interest only for a period of time and then a balloon payment. Very famously in this industry, certainly we have these big national consolidators selling every three to five years. Is that related to this balloon payment coming in? And say you don’t want to sell at the end of your term, what are your options to make sure that the business remains healthy and this balloon payment doesn’t become a real issue?

Robert Adams: Yeah, so the first thing to say is when we run a process around finding the right partner for you. So we run a full process, we’ll go out to maybe 50 different lenders, 40 lenders who are active in your market, let’s call it, then we get terms from those lenders. And a couple of things you need to be watching out for. Covenants are the single most important thing you need on your term sheet. So you’ve got financial covenants, which are your debt service cover ratio, your EBITDA multiple and your interest cover ratio. And from the business’s perspective, having headroom in those covenants is super important. The rationale for that is that when times get tough, these are the covenants to get tested. And you want to make sure you have enough headroom that if for whatever reason you had a lean year, that you can overcome these covenants. Senior facilities covenants are generally a small bit more tighter, but you generally repay that facility interest and capital, which helps you with the headroom in that scenario. Just as regards, that’s one, one area. Interest rate, as we mentioned, is another area. And then modeling out your cash flows. So if you’re on a growth trajectory, capital is generally the thing that’s constraining you. So if you can model out the difference between what you’re going to pay in capital to an institution versus what you need to grow your business and where you will end up in five years, if you have the availability of that cash flow. Generally, having the availability of that cash flow allows you to grow your business much more than if you just took a bank loan. And then when you roll out your five years, normally your debt to EBITDA level is much lower than you started out at, even if you’re only paying interest with a minimal amount of capital. So what happens there is you don’t have to sell your business. What you’d normally do is refinance that loan in the market again and you go on another journey with the same partner or with a new partner. So it’s, it’s very easy. One thing you do need to watch for on your facility agreements as you’re growing is make all provisions or make all penalties. So if you find within a couple of years that you’ve outgrown your partner, you know, this is why we always say you take a long term view on your finances, not a short term view. There could be make whole or prepayment penalties in that facility. So you just got to watch out for stuff like that. And that’s something we do as our bread and butter. That’s, that’s almost as important as your, your covenants and your rate.

Cole Strandberg: No question about it. And to that, let’s walk through a bit of a process together just to give a sense of what that looks like before jumping into a process. What should a business owner prepare before starting a process and approaching lenders? What, what do they want to see?

Robert Adams: Yes. So normally if we’re engaged with a, with a client, the first thing we’ll do is build a financial model. We will use their raw financial statements to prepare that model and their management accounts, year to date accounts. And then we prepare a teaser and a confidential information memorandum. We will do a long list of lenders that we think would be interested in the credit. And then we would get the client to sign off on all of these. Once the client signs off on these, then we do our outreach to the market to that agreed list of lenders. And that could be 30, 40, 50, it could be more depending on the transaction. And ideally then you want to whittle that down to where you’re getting indications of interest from probably seven or eight different lenders. And then once you get those indications of interest, we always like to make sure that they’re credit endorsed. They won’t be fully credit approved, but at least credit will have seen, our investment committee will have seen the contents of those term sheets and then we’ll do a summary of that for the client. So we do A side by side comparison. Tell them the pros and cons of each offer and in some cases the client will ask us to model that into the financial model to see what kind of effect it has on their cash flows as they grow. So once that’s done, then we will whittle it down to a preferred lender. So once you get it to your preferred lender, normally you go on an exclusive basis. So you sign the term sheet, you might negotiate bits and pieces of the term sheet, but then once you’re agreed on the term sheet, you sign the term sheet, you go exclusive and then the full due diligence process will start. We like to make sure that we have a data room ready and given to the lenders prior to the IOIs so that when they get to the diligence process, it’s confirmatory diligence rather than full. They’re only starting the process, so we have good level of comfort that they’re going to follow through on the, on the ioi. And then like any other transaction, you’re agreeing. So the legal docs will be generally a facility agreement, a security agreement, and in some cases it could be a personal guarantee or a personal guarantee limited to the interest in the shares in the business. So again we work with the company’s attorneys to make sure that the commercial aspects of those of those documents are as reflected in the term sheet and.

Cole Strandberg: Give us a sense, Rob, on timeline of that entire process. So looking at it through kind of three tranches, one is pre market preparation, getting the materials ready, two is in market negotiating term sheets, potentially three is we’ve chosen a term sheet. Now due diligence to funding, how do we break those down from timeline expectations?

Robert Adams: Yeah, so I would say probably in general four to six weeks to get ready to go to market. One common mistake everyone makes is they always believe that their, their information is perfect and then we go to get it ready. And if maybe not, it’s slightly imperfect, but you have a lot of work to do again to tell your story. Right. So I would say most of the transactions take six weeks to bring to market. So that’s to get to the point where you have your long list, your teaser CIM and financial model, then you go to your going to market process. I would say that can take six to eight weeks and that again is driven by the volume of lenders we’re going out to. So if it’s 40, 50 lenders and you’re having to have, you know, some might say no, just not for us at the moment. Some might say, we’d like to learn more. So you have to go through the process of getting your NDA signed with your teaser, then you’re following on with the CIM, then you’re following on with a call, and then you’re whittling down to answering all of their questions. So I would say eight weeks is a reasonable timeline for that. You can do it quicker, but it depends on the amount of people you’re actually outreaching to. And then from the time you go exclusive on your term sheet to actually draw down, I would say realistically, it’s another four to six weeks.

Cole Strandberg: All right, very good. A lot of overlap. I think folks have heard me talk about the private equity and the M and A process. A lot of overlap, I think, with the private debt process as well. A lot of similarities. Similar process, different audiences, different methods of telling the story. Slightly different diligence, but overall the same flavor for sure. How do you view, Rob, the relationship between a lender and the company versus maybe the relationship and the importance of that relationship between a private equity group and the company? I know those dynamics have some similarities likewise, but they’re also very different as well.

Robert Adams: Yeah, they are very different. So a private credit is lending to your business. It’s hoping you’re going to grow and it’ll grow with you. But at the end of the day, they’re a credit provider to your business. So again, I’m very happy with growth, controlled managed growth. But they don’t get involved in the running of your business. You run your business, you report to them on a monthly basis or a quarterly basis as agreed, and you make your payments to them. And their hope is, yes, you grow, but you grow not. They help you to grow. Private equity are the total opposite. So they come into your business, they buy into your business, they own either a minority or majority of your business, and you’re working with them to grow your business. So they’re involved, probably abort, you know, making, helping you to make strategic decisions. And again, if it’s a majority, they’re probably making the strategic decisions and you’re helping them with that as well. So you’re still running your business, but the control rests with the majority private equity. So two different, very different relationships. It’s really important in both scenarios that you get on with the, the partner. So I can’t underestimate that enough. It has to be a good partner. You have to, the feel has to be good because you’re going to be in business for 5, 7, 10 years depending on the Relationship and you need to like who you’re talking to and they need to like you and trust you.

Cole Strandberg: Eloquently put. Could not agree more. Extremely important of a relationship. Folks have heard me again say it’s dating. This process is dating before you get married and you’re getting married. Whether it’s a lender or a private equity partner doesn’t matter. That relationship is in stone for a period of time and you got to make sure it’s a good one. Now, Rob, you mentioned private debt private equity from a majority transaction standpoint. That’s normally kind of what we talk about. Talk about how we should view casting the majority private equity piece aside. There are minority equity investment firms as well. How should we view private debt versus, or I guess growing via debt versus growing via raising equity? And should one come before the other? Does it make sense to do both at the same time? Talk to me about how we view that process.

Robert Adams: Okay, so what I would say is probably the minority private equity is a relatively new phenomenon in the last maybe three or four years. Prior to that, private equities had to have a controlling stake in the business. Now you have what you call secondary and primary capital. So secondary capital never comes into a company. So secondary capital, I would buy the entrepreneur shares directly if I was private equity. So that’s money off the table for the entrepreneur. Primary capital goes into the business. So normally if you’re doing an outreach, even in a minority, there will be an element of primary and secondary. So the entrepreneur is taking some chips off the table and the business is getting some growth capital into it. If it’s a majority equity, the entrepreneur is generally taking that off the table and rolling his remaining percentage into a journey with the majority private equity. But I would say the minority versus the private debt, I would say generally they come hand in hand because if you’re doing a minority and in most cases there is a secondary, so not all of the capital is going into the business, but some of it is. And that’s allowing you get a more kind of more favorable terms on your debt. So private credit has two streams of business that it looks at. It goes sponsor backed, which is effectively a private equity business or a venture capital business invested in the company or sponsor less. So if it’s sponsorless, it’s just the entrepreneur on his own. So just to give you a sense, there’s probably four to one private credit that would deal. So the four would deal with sponsor backed and the one would deal with sponsor less. Just entrepreneurs. But to put it in Context, there’s still plenty to deal with both sides of the market. Just some of the private credit have a requirement that they have to be sponsor backed. Logic for that. Justice Seiko the logic for that is there’s a belief that the private equity is going to follow its money if, if it needs to. So that’s, that’s the clear logic. First.

Cole Strandberg: Sure makes total sense. And you know, interestingly enough I, I’d be remiss not to point out that growth equity, that minority equity for most businesses in the collision repair space, it’s not really an option. It really is for small to medium sized businesses who are interested in pursuing that private equity path. The vast, vast, vast majority are going to be interested in majority buyouts. However, for these fast growing crazy companies, I mean we saw Summit Partners get into collision, right, because they were that company fast growing. There are exceptions. However, for the sake of the kind of standard collision repair world, even at a level of scale, you’re typically looking at private debt and, or private equity from a majority perspective. Rob man, you’ve been so generous with your time. I really do appreciate it. Before I get your contact info and we land the plane here, I do want to kind of bring something right back home. And if you’re listening to this and you’re, you’re on the fence about man, private equity or private debt might be the right fit. I’m really not sure one or the other from a private debt perspective who should go that route and why.

Robert Adams: So I would say everybody who’s in the category of 2 million plus EBITDA should be thinking both bank debt and private credit. So when we run a process, we don’t do it one or the other. We run both together to see what the options are from both. So I think entrepreneurs should be aware of everything that’s in the market and they should be looking for a good provider or advisor to be able to give them options on both sides of the the sphere there. And so private equity, you generally need to be 5 million plus of EBITDA before you’re attractive to a private equity business. So on the majority equity side, so just maybe to say on private equity, one thing we haven’t said is there’s two types of private equity. It’s a platform or a bolt on. So as you mentioned, so much coming in that was a platform investment. So they’re investing in that business. For that business to go and buy loads of more businesses as bolt ons, your bolt on generally has to have 2 million of EBITDA. Your platform 5 million of you, just to clarify.

Cole Strandberg: Totally makes sense and I would echo that. However, collision’s a little bit weird with our supply and demand issues. So we’re seeing some bigger and bigger firms coming further and further down the EBITDA ladder, but would agree in totality. Rob, I lied man. One last thing before we fully land the plane. The vast majority, I think, of businesses and business owners in the collision repair space would, would probably classify themselves as financially pretty conservative. Not a ton of debt if any. I know for, for our family’s business we were generally anti debt and, and truthfully that’s, that’s a one way of thinking. Maybe a lack of education on the topic, advocate for debt and why debt’s not the boogeyman that you really want to avoid in all cases.

Robert Adams: Yeah, so for me it’s not about debt or equity. It’s really about making sure that you’re not putting your business at risk. So it comes down to how much of debt or how much of equity you’re raising into your business. So I think anybody who’s looking at somewhere between two and three times EBITDA of a debt multiple in their business, you know, if you’ve got a, a business that’s in growth mode, not, not, not retrenchment, you know, that’s very sustainable debt for a business instead of giving away the equity at that point. Because equity is expensive to give away, whereas debt, if you get the right debt and the right partner, it’s much cheaper in the long run. And the other thing is that debt allows you to get to a position where you can get more value for your equity. So it might not be one instead of the other, but you could use one to get you to a point where you get into private equity at that point and you’re getting more bang for your buck. But again it’s down to levels, leverage levels and making sure you’re not over exposing your business. Because most entrepreneurs have spent their life building the business. The last thing they want to do is think, oh, somebody’s going to come in and take my business off me because I put debt on the, on the balance sheet. There is an educational piece there, but there’s also, you know, make sure it’s, it’s a manageable debt and debt is good for businesses. But the right amount of debt is the critical point.

Cole Strandberg: Well put. You gotta grow the right way, whether that’s debt equity, organic scale. Gotta grow responsibly for sure. Now Rob, folks can reach out to me or you to learn more about Focus and private debt and your whole arm of the business. But they have my contact info. Where can people follow along with you and get in touch with you if they have some questions?

Robert Adams: Yeah, so people can email me at [email protected] Reach out at any point. Happy to take any questions if people have general inquiries or anything like that. Very happy to help where we can.

Cole Strandberg: Rob, thank you so much. Always a pleasure to connect. I know you and I speak multiple times a week, but it’s pretty fun to have our first recorded conversation here for the Collision Vision. Thank you so much for joining us.