Business Acquisition Loans and Financing

Lining up a big deal requires capital to bring to the closing table. Mid-sized businesses need business acquisition loans and financing to do this. If the company you are buying is a good one, the purchase price will be based on earnings. Better companies require higher prices relative to their earnings or EBITDA. This can create problems for buyers who typically utilize banks for borrowing needs. Banks are not set up to advance business acquisition loans and financing. Banks will lend against asset value not earnings value. What then are the options when faced with this situation? There are a variety of options but they all involve reaching outside of the banking sector to capital providers that specialize in business acquisition loans. The key to sourcing good business acquisition loans is to find a lender that shares your view. A good lender is able to see beyond the numbers and discern the differentiating strengths of the company. This enables the lender to more comfortably buy into the company’s ability to increase profit and cash flow. Through increased cash flow, the company demonstrates the ability to service the debt and repay the loan. The lenders that provide business acquisition loans are known as cash flow lenders. This special breed includes mezzanine lenders, unitranche lenders, and first and second lien lenders. All three types of lenders underwrite the loans based on future cash flow projections. Through their vision and strategic understanding of corporate growth, these lenders have become reliable providers of business acquisition loans and financing to the middle market.

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