Business Acquisition Financing | The Devil Is In The Details

Attention To The Details Can Make Or Break Your Quest For Business Acquisition Financing

Arguably one of the most difficult forms of financing to secure is business acquisition financing.

The degree of difficulty has a lot to do with the fact that many business acquisitions of small and medium sized businesses fail after the change of control takes place, making financiers more Leary of this type of business financing request.

But don’ t despair if you’re in the process of trying to locate and secure capital for an acquisition.  Financing is available and there is a solution for making sure that you get your hands on the money you need.

Simply put, you need to make sure that you’re focused on the details of the deal.

A lender or investor considering advancing capital for a business acquisition want to see that all change of control issues are properly addressed, all risk areas are covered off, and that there is a solid plan of action going forward led by a well informed and competent individual(s).

Basically, they really are going to get into the details.

  1. Can all customer and supplier contracts be transferred or assigned to the buyer?
  2. I s there sufficient working capital in place to operate the business and allow for contingencies?
  3. Is there any outstanding litigation that could impact future business?
  4. Will the seller provide support and training?
  5. Are there at least 2 years of financial projections (income statement, balance sheet, and cash flow) that are based on sound and supportable assumptions and also logically bridge from past performance?
  6. Will there be any assignment of existing debts?
  7. Are government remittances up to date if its a share purchase?
  8. What is the orderly or forced liquidation value of the equipment?
  9. If there’s real estate, what’s the appraised value and has there been a recent environmental assessment made?
  10. And so on, and so on, and so on.

    Basically, the details.  Could be just a few… likely more in the line of several pages.

    And in many cases, potential financiers are asking you to provide your due diligence assessment of all the things you should be worried about anyway regarding the proposed purchase, which can actually be viewed as a good thing.

    After all,  no buyer wants to invest their hard earned money and time on a failed venture.  While there is never a guarantee of success as anything can get screwed up or get blind sided by unexpected events, covering off the obvious issues right in front of you is a good starting point on the road map to success.

    Unfortunately, many prospective buyers don’t sweat the details and at times want to dive right in where angels fear to trend.  And that’s exactly why they don’t get any financing.

    The details can be a real pain.  It takes time to deal with.  It costs money to work with qualified advisors.

    But the risk of not sweating even the smaller stuff can be catastrophic in nature when you’re trying to take on a business that you have never operated and will have much to learn about in the early going of ownership

About the Author Brent Finlay