How to Use Business Acquisition Financing to Buying A Business
When business owners and entrepreneurs make the decision to buy an existing business they need some solid info around how to finance the transaction . So what are in fact the best ways to execute your strategy on business purchase financing?
In many situations clients tell us they often have the ' inside track' on a business or company that would accept a good offer based on the current situation of the seller. There are of course various reasons for sellers wishing to divest of their business - these days succession and management buyouts are popular reasons.
Obviously there exists key reasons why buying an established company is a solid way to execute on your business plans . Most of those reasons are obvious:
Existing revenue and profits
Experienced management and personnel already in place
Elimination of start up risk
Etc. !
In many cases some seller financing may in fact prove to be critical in financing your deal. Previous owners remain in a subordinate position via whats known as a vendor take back, and often the skills an expertise of the seller are valuable in early stages of the takeover.
A debate sometimes exists, but most experts believe it is easier to arrange funding for an established business. When cash flow and sales are positive they play a key role in establishing the ability to repay business acquisition loans of various types. In many cases franchises are part of todays acquiring of businesses - they have brand and reputation already place.
The concept of valuation is key in purchasing a company . Higher valuations might in fact mean you have to finance goodwill when most lenders prefer asset financing solutions
We should point out that many businesses that are purchases are in some form of ' distress' . Here valuations are often attractive but the buyer must demonstrate confidence around ' the turnaround'. Valuations can be made through the buyers own expertise, or you can use the services of qualified business valuators.
What are the key issues in valuation and financing ? They include:
Quality of financials
Revenue trends
Cash flow and working capital positions ( Throwing off cash is better than using cash !)
When we work with clients we spend a lot of time ' normalizing' those financials to ensure the right assumptions and costs are in place.
Business acquisition finance can be facilitate through term loans from traditional and alternative sources, government loans, asset based loans, and cash flow loans.
Seek out and speak to a
trusted, credible and experienced Canadian business financing advisor with a track record of success in how to finance business acquisitions.
7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Click Here For 7 PARK AVENUE FINANCIAL website !
Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.
Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.
Stan Prokop
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