HOW DO YOU FINANCE A BUSINESS ACQUISITION
Business financing sometimes presents an acquisition opportunity. How does acquisition finance work when the opportunity arises, and what loan scenarios might match your needs. We're talking about the ' buy-side '. Let's dig in.Naturally, the reasons to either purchase or merge into another company vary when it comes to a business acquisition. Some of the most typical scenarios include growing sales faster (i.e. non organically), entering new geographies for sales revenue opportunities, different client or market segments, etc. The need then arises for financing to purchase an existing business.
How are mergers and acquisitions ( ' m&a ' financing ) financed? Some key basics quickly emerge for business owners/ financial mgrs when contemplating a business loan and buying and financing another firm. Knowing these allows you to access and talk to acquisition financing lenders as you are prepared. Those basics?
THE FINANCE BASICS AROUND A SOLID ACQUISITION STRATEGY
Your business loan requirements investigation should include, but not be limited to:
Determining proper value
Understanding financial strengths and weaknesses
Knowing the optimal amount of debt/equity that will make the transaction work
Knowing where to seek financing and what type of finance alternatives exist when you're buying a business
The seller in some cases can in fact be an important ally in closing a transaction. If they have the proper personal or financial incentives their ability to help structure a ' seller financing ' component to the transaction could be key to success. In some cases that might mean adjusting the purchase price higher, but that seller involvement can well mean a better chance of a more successful transition.
While the proverbial ' friends and family ' financing is certainly one alternative that has been used in the past most top experts will also warn against that scenario; as well pledging personal assets is also high on the not desirable list!
Since receivables and growth in A/R are often a significant component of any growth strategy accounts receivable financing solutions such as debt factoring and asset-based credit lines can play a key role in acquisitions financing.
'Small ' is of course a relative term, but don't forget to also consider the Govt Guaranteed SBL Small Business Loan when it comes to acquiring a business. That loan limit now is 1 Million dollars, but critical to note that it covers only two asset categories, equipment and leasehold improvements.
It is very safe to say that your acquisition plans should also include a well-crafted business plan or cash flow analysis of the new or combined operation.
A careful study of your working capital and loan needs will also help identify the proper method to finance a purchase. Those other solutions to help finance your transaction are a combo of new, alternative, traditional and non-traditional methods of Canadian business financing. They will help you complete a final financing structure. They include:
BUYOUT AND ACQUISITION FINANCE SOLUTIONS
Bank term loans/ operating lines of creditAsset-based bridge loans
Inventory Loans
PO Finance
Confidential receivables financing
Sale leasebacks
Commercial mortgage financing/refinance
Royalty Financing
Refundable tax credit finance ( sr&ed loans )
Unsecured cash flow/mezzanine finance loans
The ultimate choice in your acquisition finance strategy should include some level of analysis around your overall expected rate of return. Ultimately success in the acquisition will be demonstrated by your ability to manage, grown and improve the value of the new or combined business.
Conclusion :
Financing acquisitions allows firms to leverage the assets and cash flow of target companies, allowing them to complete acquisitions with a combination of debt solutions, owner equity, cash flow financing, and a potential seller financing component.
If you're looking for the best financial acquisitions solutions and the proper funding to buy a business seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your business finance loan needs.
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 !
7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.
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. He is an experienced
business financing consultant
.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 financing 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.
Click here for the business finance track record of 7 Park Avenue Financial
