Read this article on Bloomberg recently.
Basically, lending standards are so loose right now that private equity sponsors can sell off collateral, or even isolate assets intentionally as to be out of reach from creditors in the event of default. Covenants have become useless, given how weakly they're structured. LBOs, by definition, means minimal equity.
BUT, if you're a small time entrepreneur, you have to pledge all business assets, sign unlimited personal guarantees, and that's after having substantially more skin-in-the-game than a financial investor. Arguably, small businesses are more productive for the economy than LBOs. They create jobs (even if owners are employees), are more community-oriented, potentially better customer service, locally based, etc.
Maybe this is one of the reasons why income and wealth inequality are big and growing problems. Also, what's the typical leverage of an LBO (in terms of equity % or EBITDA multiple)?
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