Securing favorable financing terms for any kind of acquisition is often extremely challenging, especially in today’s financial atmosphere. The economy has been relatively sluggish over the past 24 months, and that has caused a number of changes to take place in this country’s financial system. Most traditional lenders have tightened up their lending criteria, and that has caused a shortage in available credit and funding for many entrepreneurs. This being the case, business been have been obliged to seek some creative forms of business acquisition financing in order to proceed with acquisitions and other transactions.
Alternative Sources for Acquisition Funding
Alternative lenders will have their own unique financing criteria, so it will always be necessary for a business entrepreneur to carefully research those criteria, to see if they align with business objectives. One thing that will influence the availability of funding for such ventures is the type of company that is being acquired in the business transaction. Most lenders consider it a good investment to fund an acquisition that involves a company that has significant assets and very little debt, as well as a positive cash flow.
Depending on the lender whom you work with, there could be several layers of funding involved in an acquisition transaction, e.g. private equity, mezzanine financing, and bank financing. The characteristics of any acquisition which are most relevant to the lender are the type of business being acquired, the growth plans for the acquisition, perceived market risk, and the current value of both assets and cash flow.
Some of the funding sources which an entrepreneur might consider when looking for a cash source include bank financing, seller financing, asset-based financing, equity financing, and mezzanine financing. One or more of these may be the best possible solution to your cash requirements, and to determine which is most suitable for your business, you will need to research the lending terms carefully, and make sure they align properly with your own business objectives.
Need to Finance Your Acquisition?
If you’re in need of funding for your planned acquisition, we may be able to provide financial assistance. Contact us at DAL Commercial Capital so we can discuss some options with you that may provide the necessary funding.