How the PAL Fund Unlocks Small Business Acquisition
New Majority Capital is expanding its Pre-Acquisition Loan (PAL) Fund, a crucial financial tool designed to unlock access to entrepreneurship through acquisition.
Seeded by Common Future, with a new strategic program-related investment from Deutsche Bank Americas Foundation’s New Initiatives Fund, the PAL program provides 0% forgivable loans to cover the out-of-pocket costs required before an acquisition closes, such as quality-of-earnings analysis and legal fees. By removing these early financial barriers, the fund enables more entrepreneurs to participate in small business acquisitions. This opens pathways to ownership for individuals who may not otherwise have the capital to enter the process.
With the support of our funders, we’re able to bridge a critical gap in ownership opportunity: flexible, patient capital at the exact moment entrepreneurs need it most.
Havell Rodrigues, CEO of New Majority Capital, explains:
“Access to business ownership shouldn’t depend on whether someone already has wealth. The PAL Fund helps level the playing field by providing patient capital at the moment entrepreneurs need it most. With the support of funders like Common Future and Deutsche Bank’s Community Development Finance Group, we’re making it possible for more people to step into ownership and build long-term wealth in their communities.”
The Ownership Gap in the “Silver Tsunami”
The expansion comes at a critical moment. The “Silver Tsunami” represents both an unprecedented opportunity and a challenge.
According to the latest McKinsey report, over the next ten years, approximately six million businesses owned by Baby Boomers are approaching the same inflection point: how to transition their businesses when they retire. Yet 60% of them have no succession plan, putting an estimated 46% of U.S. jobs at risk over the next decade.
While traditional entrepreneurship can be inaccessible to many, entrepreneurship through acquisition opens new pathways. However, innovative capital solutions are required to unlock these opportunities for the next generation of owners.
New Majority Capital’s mission is to leverage the wealth transfer opportunity of the nearly $5 trillion in enterprise value of viable businesses ready to sell, to address the persistent wealth gap in the United States. Through its model, NMC expands access to small business ownership, a proven pathway to economic mobility, intergenerational wealth-building, and stronger communities by helping entrepreneurs acquire and grow existing businesses.
Catalytic Capital for Inclusive Ownership
Utilizing philanthropic capital, PAL supports the final critical components of acquisition that would otherwise be out-of-pocket expenses for acquirers. It is also a self-sustaining financial vehicle. As the entrepreneurs close on their acquisitions, they repay the PAL financing back into the Fund as part of their closing costs or as the acquired businesses continue to generate profits.
Common Future, which seeded the PAL Fund, was drawn to the strong alignment between the program’s design and its mission to expand access to non-extractive capital, “Our goals as an organization are to increase access and affordability of capital, as well as shift power and agency to those who are often left out of or extracted by our current economic systems. The PAL Fund, with its patient and non-extractive capital design, along with long-term wealth-building opportunities fit squarely into these goals.” Sandhya Nakhasi, Co-CEO of Common Future.
In this way, PAL helps catalyze ownership opportunities that might not happen without early-stage capital support, serving communities otherwise excluded from traditional capital sources.
A New Model for the Next Generation of Ownership
As millions of small businesses approach ownership transition in the coming years, innovative capital solutions will play an increasingly important role in ensuring those businesses remain strong contributors to their communities. By combining philanthropic capital with traditional financial expertise, the PAL Fund demonstrates how collaborative models can expand access to ownership while preserving businesses and jobs that might otherwise be lost.
Sandhya Nakhasi adds that other funders should take note of the model when considering new approaches to capital deployment:
“Take note of the innovation and solutions community led models are solving for and see the opportunity to radically invest and fund in economies that are deserving of access through non-extractive ways”.
The PAL Fund shows what’s possible when catalytic capital, traditional finance, and entrepreneurial talent come together to unlock ownership.
