A napkin with three boxes on it finally made the stack make sense

Meetup, back table, guy I'd never met. I said something about not understanding where all the money in a big deal comes from and he flipped over a napkin and drew three boxes stacked up.

Bottom box, senior loan. He said that's the bank, cheapest money, first in line if everything goes wrong. Top box, the owner's own equity, most expensive, last in line, gets whatever's left. Then he pointed at the space between them and drew a third box in the middle. He said this is where the fights are.

He said if the bank will only do so much and the owner can't or won't put in the rest, somebody sells you the middle. It costs more than the bank and less than giving away ownership, and it sits behind the bank in line, which is why it costs more.

Then he wrote 10 to 15 next to the middle box and said that's roughly what that money wants, and if you can't make the deal work paying that, you don't have a deal, you have a wish.

I've been trying to figure out which strategy fits me for about a year. I still don't know. But I stopped thinking of a deal as one loan and one buyer, which is how I'd been picturing it the whole time.