This is the 13th of a Series of 15 short articles on “HOW TO BUY THE RIGHT COMPANY” They will be posted at one a week
Financing the acquisition requires thorough and careful planning. You need to consider the different sources of funding accessible to you.
The amount required for purchasing the company may dictate the types of sources that you seek out.
Some combination of debt and equity is likely. Be wary of overextending yourself with too much debt.
On the other hand, be careful to protect your immediate family by not taking too great a risk with your personal assets.
It should not be necessary to put your entire life’s savings up for collateral. If the deal makes sound business sense, if a bank or other lending institution starts making unreasonable demands, check out another bank, review your business plan, or try some other approach.
Lending institutions vary from the unscrupulous to the impeccably correct. You need to be especially cautious with any lender that is likely to take your company away from you if you fall behind on a few payments.
Check out your sources, both equity and debt, as thoroughly as you check out the seller. Are you dealing with honest individuals? Have you reviewed the fine print for hidden commitments that might jeopardize your ownership?
The earlier you begin to develop your financing plan, the more likely you will be ready to close, when the purchase agreement is finally negotiated and signed.
Reference: “How to Acquire the Right Business”
by John Psarouthakis and Lorraine Uhlaner