Trustworthy Searchers, SBA Policy, and Underwriting ETA Investments w/ Grant Hensel

Today’s guest is Grant Hensel, founder of Entrepreneurial Capital, a fund that partners with self-funded searchers acquiring small businesses through ETA. After building and exiting businesses of his own, making personal ETA investments, and completing an acquisition with his wife, Grant launched Entrepreneurial Capital to back the next generation of owner-operators.

In this episode, Grant explains why he prefers the self-funded search model over traditional search funds, how he evaluates both businesses and searchers, and the investment philosophy behind backing a "trustworthy searcher buying an enduring business." The conversation also covers the evolution of the ETA ecosystem, lessons from underwriting dozens of acquisitions, and the growing role of SBA lending and policy in financing small business acquisitions.

Discussion Points:

• Why Grant is drawn to self-funded search over the traditional search fund model
• Entrepreneurial Capital’s thesis: a trustworthy searcher buying an enduring business
• Raising a $12.8 million debut fund backed by 80 LPs
• Key underwriting risks: customer concentration, economic resilience, and capital efficiency
• Evaluating searcher trustworthiness using the Speed of Trust framework
• Why the self-funded search community is a surprisingly small, interconnected world
• Sourcing talent versus sourcing deals, and the This Week in ETA newsletter
• Managing a deal with multiple interested searchers and involving the seller in the selection
• SBA loan basics and its role in financing ETA acquisitions
• Recent tightening of SBA underwriting standards and citizenship eligibility
• The SBA E-Tran issue impacting repeat investors in small business acquisitions
• How Grant thinks about portfolio construction, defaults, and downside risk
• Distinguishing operational challenges from seller fraud
• Potential effects of raising the SBA 7(a) loan cap
• Perspectives on personal guarantees and required equity injections
• Why Grant favors conservative leverage in SBA-backed acquisitions
• Outlook on future fund size and the evolving ETA equity capital landscape

Masters in Small Business M&A is produced by its host Peter Lehrman and the team at Axial (www.axial.com). Axial makes it easy for small business owners to confidentially explore growth capital and exit transactions with top-ranked lower middle market M&A advisors and professional capital partners. In every episode, we explore the dynamic world of small business M&A, interviewing a mix of proven and emerging owners, operators, acquirers, and M&A advisors whose strategies and methods are being put to the test.

If you’d like to go deeper, head to Axial.com, where we make available the Axial member directories, downloadable tools for dealmakers, the Axial quarterly lower middle market investment banking league-table rankings, the SMB M&A pipeline report, and other useful information. If you’re a business owner, professional acquirer, or M&A adviso...