A courier or final-mile company of this size is usually bought with a senior cash-flow term loan or unitranche and an asset-based revolver against shipper receivables, with buyer or sponsor equity and sometimes a seller note or earnout behind them. Company-owned vehicles sit in the senior collateral or under existing vehicle loans and leases, which lenders count as debt. Lenders focus on whether the major delivery contracts transfer, how concentrated revenue is, how drivers are engaged, the age of the fleet, and the insurance and claims history.
- Usual structure
- Senior term loan or unitranche, plus an asset-based revolver on receivables
- Cash-flow leverage
- Senior lenders commonly 2x to 3.5x EBITDA, less where one shipper dominates
- What moves the credit
- Contract terms, shipper concentration, driver model, insurance cost
- Working collateral
- Shipper receivables, subject to concentration caps
- Common buyers
- Sponsors building logistics platforms, regional operators adding markets
What kind of courier business is it?
"Courier" covers several businesses with very different credit profiles. The first underwriting question is which one the buyer is purchasing, because that decides where the risk sits. At this size a company often runs several of these lines across a region, and lenders read each separately.
| Business model | How it earns | What a lender worries about |
|---|---|---|
| Scheduled route contracts: pharmacy, lab, auto parts, banking and document runs | A fixed fee per route or stop, recurring daily or weekly | Contract term and notice periods; whether each shipper keeps the routes with a new owner |
| Contractor in a national parcel network's final-mile program | Payment per route, stop or package under the network's terms | Almost all revenue from one counterparty that sets the rates, can change the terms, and must approve any sale |
| On-demand and rush delivery | Per-delivery pricing to many customers | Volume volatility, and how much depends on the seller's own relationships |
| Medical and specimen courier | Contracted routes with chain-of-custody and handling requirements | Compliance training and records, and the few health systems or labs that make up revenue |
| Final-mile for retailers: furniture, appliances, installed goods | Per-stop or per-job fees from a small number of retailers | Damage claims, two-person crews, and retailer concentration |
The contracts are the business
Almost every courier purchase turns on whether the delivery contracts come with it. Many shipper agreements run for short terms, renew automatically, and can be ended by either side on notice. Some prohibit assignment without consent; others let the customer terminate on a change of ownership. In an asset purchase each material customer has to accept the new entity. In a stock purchase the entity stays, but not necessarily the customer's goodwill. Lenders read every material contract for these terms and want to know which customers have been told, and how they responded. See change-of-control consents and asset vs stock purchase.
Contractors in a national parcel network's final-mile program face the sharpest version of this. The program operator typically approves or declines the buyer, can adjust routes and rates, and in some programs the right to serve a territory is not the seller's to sell at all. Lenders want the operator's approval in hand, and they size the debt knowing one counterparty controls both the revenue and its price. Some lenders decline the model; others lend less, over shorter terms. See customer concentration in an acquisition.
Fuel is the other contract term that matters. Agreements with a fuel surcharge that moves with diesel or gasoline prices protect margin; flat-rate contracts leave the owner absorbing every rise. Lenders look at gross margin through a year of fuel price swings to see which kind of business they are lending to.
Before the letter of intent, list every material customer, what its contract says about assignment and change of control, and when it can walk away.
Drivers, vehicles and insurance
How a courier company engages its drivers shapes its cost structure, its collateral and its legal exposure at the same time.
| Driver and vehicle model | Cash flow | Collateral | What lenders check |
|---|---|---|---|
| Employee drivers in company-owned vehicles | Highest fixed costs: payroll, vehicle payments, fuel, maintenance | The fleet, net of existing liens | Fleet age and mileage, replacement schedule, workers' compensation and auto liability history |
| Employee drivers in leased vehicles | Lease payments are a fixed charge alongside debt service | Little; the lessor owns the vehicles | Lease terms, return conditions, whether leases transfer |
| Independent contractors in their own vehicles | Variable cost per route or stop; lowest capital spending | Almost none beyond receivables | Worker classification exposure and contractor retention |
Independent-contractor fleets carry a risk buyers should price. Where the company controls schedules, routes, uniforms and vehicle markings, state agencies and courts in many places have treated contractors as employees, with back payroll taxes and penalties. In a stock purchase that exposure comes with the company; an asset purchase generally leaves it with the seller, and lenders often prefer that structure for this reason, or want an indemnity and escrow behind it. See escrows and holdbacks.
Company-owned vans and trucks wear out on a predictable schedule. A lender deducts a realistic allowance for replacing them before measuring coverage, and notices a seller who stopped replacing vehicles in the years before the sale. See maintenance capex. Vehicle loans and leases are either paid off at closing or assumed, and either way they count as debt.
Insurance is where courier cash flow most often surprises a buyer. Commercial auto liability, cargo and workers' compensation are large costs, and a new owner is quoted on the fleet's claims history. Lenders ask for several years of loss runs and, before closing, a quote for the buyer's own program, because a higher premium comes straight out of the earnings that pay the debt.
Receivables, and why concentration limits the line
Shippers pay on terms, so the business carries receivables and needs working capital to cover payroll and fuel while it waits. At this size that job belongs to an asset-based revolver. Asset-based lenders typically advance 80% to 90% of eligible receivables, treat invoices more than 90 days past invoice as ineligible, and commonly cap any single customer at 20% to 25% of eligible receivables.
The cap matters in this trade. In a simple version of the calculation, a courier with eligible receivables of 1,000, of which 700 is owed by one shipper, has that shipper counted only up to a quarter of the 1,000, or 250. The other 450 drops out, and an advance rate in the 80% to 90% range yields roughly 440 to 495 of availability rather than 800 to 900. A buyer who counts on the full line to fund working capital can be short on day one. See how a borrowing base works and concentration limits.
Sellers of smaller courier companies often sell their receivables rather than borrow against them. The buyer pays that arrangement off at closing and replaces it with a revolver; how a borrowing base works covers how it is sized.
How courier acquisitions are structured
- Senior debt. A term loan sized on EBITDA after a vehicle replacement allowance; senior cash-flow lenders to lower-middle-market companies commonly lend 2x to 3.5x EBITDA, and less where one shipper dominates. Conventional lenders commonly look for debt service coverage of at least 1.25x.
- Unitranche. For a company with contracted, recurring routes and a broad customer base, a private credit fund may offer one loan in place of senior and subordinated layers. See senior vs unitranche.
- The revolver. Against shipper receivables, sized to the payroll and fuel cycle.
- Seller paper and earnouts. Where a key contract is up for renewal, part of the price is often deferred or tied to the renewal. Senior lenders allow either if it is subordinated to them.
- Equity. Sponsor or buyer equity, sometimes with the seller rolling a stake.
Buyers adding a courier company to an existing logistics platform are sized on the combined business; see add-on acquisition financing. Related businesses raise different questions: trucking, where the trucks are the collateral, and freight brokerage, where there are no trucks at all.
The file for a courier acquisition
The term loan needs the P&L, balance sheet and debt schedule, with a year-to-date P&L and AP aging where available. The revolver needs an AR aging by customer with days outstanding, the AP aging and the existing liens. The acquisition adds the target's latest full year of figures, never an older year, and the letter of intent. For a courier company, lenders also want:
- Every material customer contract, with term, notice, assignment and change-of-control terms, and any program agreement with a parcel network.
- Revenue and gross margin by customer and by route for several years.
- A driver roster: employee or contractor, tenure, and how contractors are engaged.
- A fleet list with year, mileage, ownership or lease, and any liens.
- Insurance policies, several years of loss runs, and a quote for the buyer's own program.
Senior bankers run every Midas Partners engagement. Once the documents are in, software builds the financing model, lender presentation, blind teaser and underwriting memo in a day, and a senior banker checks every page before the client approves it. Lenders that fit see the blind teaser first, and the client approves each by name before it learns who the company is. Of the 1,800+ lenders in the book, 1,148 write term and private credit and 235 write asset-based loans and lines. See the package.
Common questions
- Can I finance buying a contractor in a national parcel network's final-mile program?
- Sometimes. The program operator must usually approve the buyer, and lenders want that approval before closing. Because one counterparty sets the routes and rates, lenders size these loans conservatively, and some do not finance the model at all.
- Do lenders care whether drivers are employees or contractors?
- Yes, for three reasons: it changes the cost structure, it decides whether there are vehicles to take as collateral, and misclassified contractors are a liability that can follow the company in a stock purchase.
- Why is my revolver smaller than my receivables?
- Borrowing bases exclude invoices more than 90 days past invoice and commonly cap any one customer at 20% to 25% of eligible receivables. A courier with one dominant shipper can have much of its receivables excluded.
- Will lenders credit a contract the company has just won?
- Partly, and only with evidence: the signed contract, its start date and the cost to serve it. Lenders size mainly on results already earned and treat new contracts as support rather than the base.
- Can part of the price depend on a key contract renewing?
- In a conventional deal, yes. An earnout or a seller note that is reduced if the contract is lost is common, and senior lenders allow it if it is subordinated to them.