Six Sources For Financing A Business Acquisition

Six Financing Sources for Buying a Business 

Congratulations. You’ve decided to buy a company. The only thing that stands between you and the purchase is lack of capital. Fortunately, many sources of capital exist that can help you accomplish an acquisition-some simple and straightforward, others more esoteric.

Six Financial SourcesThe Big 6

Wading through financing choices-let alone picking one-can be taxing. Here are the basics about six options you can discuss with an acquisition professional.

1. Buyer’s liquid cash.

On the simple and straightforward side of the ledger sits your bank account. When considering the use of your cash, note how much risk you’re willing to assume, because risk grows in proportion to cash expended. That said, why should you put up any money at all? Well, when approaching third parties for money, keep in mind that they want to share the risk-or, as it’s sometimes known, they want the purchaser to have “skin in the game.” Investors rightly believe that it’s in everyone’s interest for all investors to be somewhat “at risk.”

2. Buyer’s company stock.

If you’re a publicly-held company, or a privately-held company with plans to go public soon, you may want to consider the use of your company’s stock (either preferred or common). But keep in mind that the seller’s motivation is usually in creating a “liquidity event.” As a result, cash will be king, so using stock means the stock will be discounted against the cash price, increasing the number of shares you’ll need to use and, ultimately, raising the purchase price.

3. Acquisition target’s assets.

Interestingly, many potential acquirers look at the target’s assets. Frequently, banks and other secured lenders make loans against such assets, including accounts receivable, inventory (raw material and finished goods only), furniture, fixtures, machinery and equipment. The dollar amount banks will lend against these asset categories varies-usually starting at 80% to 85% of the most liquid assets (receivables less than 90 days old).

Next come raw materials and finished goods. When banks or other lending institutions consider inventory, they normally will advance no more than 50% to 55% of value – and then only when the inventory in question is deemed liquid. Last, most banks will lend approximately 80% of “liquidation value” (the price a buyer would pay for an asset at auction) against the borrower’s fixed assets.

4. Cash flow loan. 

Some lenders will make a cash flow (also known as an over-advance) loan, when the borrower, target or the combined business’s cash flow supports a loan of this type. Usually, these additional advances are made only on a short-term basis. And, if the transaction involves only privately-held companies, it’s typical for banks to secure personal guarantees from the borrowing entity’s principal stockholders.

5. Real estate. 

Another potential cash source is the company’s real estate, if you intend to acquire it along with the business.You can mortgage or refinance buildings and land if they’re already subject to a mortgage, or sell and lease them back.

6. Mezzanine/subordinated lenders. 

These lenders comprise many private equity groups. The groups’ risk level falls between banks and other secured lending institutions discussed previously, and pure equity investors. Mezzanine/subordinated lenders’ compensation is between that of equity providers and secured debt holders.

Mezzanine lenders normally get a cumulative cash yield on their investment of 9% to 15% over the investment’s life. In addition, they also get a “kicker” that typically appears in the form of warrants, which will increase these investors’ yield to 18% to 25%. The number of offered warrants governs the expected yield on these nominally priced warrants.

Narrowing It Down

There’s no such thing as a free lunch or financing option. Every cash source costs money, usually in the form of interest owed to the lender. So, when considering whether to buy a business and how to pay for it, remember that part of the ongoing cost of operating the acquired company will be paying for other people’s money you used to purchase it.

If you need help breaking down funding options-or want to discuss other facets of acquisitions, please call VR at 1.800.377.8722 .

VR can also help with setting up Financing if you are interested in owning a VR Business Brokers Franchise.

You can view the  VR Presentation Videos & PDFs  for more information on owning and running your own VR Business Sales office.

More Successful Transaction By VR Business Brokers

SUCCESSFUL BUSINESS TRANSACTIONS

Ground-Route Transportation Business

VR Business Sales of New Haven, Connecticut, a leader in the sale of privately-held companies, recently facilitated the strategic sale of a ground-route transportation business for $628,000.

The transaction, which closed last month, was handled by William Hall, a business intermediary specialist.

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Eco-Friendly Dry-Cleaning Plant

VR Business Sales of Greensboro, North Carolina, a leader in the sale of privately-held companies, recently facilitated the strategic sale of an eco-friendly dry-cleaning plant for $192,500.

The transaction, which closed last month, was handled by Ben Haines, a business intermediary specialist.

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NEW BUSINESS ENGAGEMENTS

Two Independent Compounding Pharmacies

VR Mergers & Acquisitions, located in West Palm Beach, Florida, announced it has been engaged by an owner of two independent compounding pharmacies to assist in facilitating the sale of their businesses.

These two full service pharmacies do both retail of over-the-counter and prescription medication as well as medical equipment such as wheel chairs, hospital beds and CPM machines. Go to the VR Web Site for further details.

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Pizzeria and Sports Bar

VR Business Brokers, located in Bensalem, Pennsylvania, the leading business intermediary firm in the area, has recently been engaged to assist in facilitating the strategic sale of a pizzeria and sports bar in Philadelphia.

This business is located in a busy neighborhood where the locals like to come for a good time. Great opportunity to enjoy the success of this restaurant. All inventory and equipment, as well as liquor license, come with the sale. Click here for more details.

ADDITIONAL ENGAGEMENTS

Superior Printing Company, FL: $1,225,000
Auto Salvage Yard, KS: $409,000
Liquor Store, CA: $235,000
Full-Service Day Spa, SC: $170,000
Upscale Print Shop, ON: $120,000

VR is celebrating over 30 years as the world’s only network of full-time professional business intermediaries that addresses the needs of small and mid-sized businesses.

VR has sold more businesses in the world than anyone®.

VR Business Franchise locations are available throughout U.S., Canada, and Europe.

Now is a Great Time to Become Part of VR Franchise Opportunity.

View our VR Presentation Videos & PDFs  for more information on becoming part of the successful network of VR Business Sales offices,

or call our Director of Franchise Development at 800-377-8722  or 954-565-1555

 

Sell More Businesses With a VR Business Brokers Franchise Brokerage

VR has sold more businesses in the World than anyone®

You can become a part of the successful VR Business Brokers team.

VR Business Franchises are available in the U.S., Canada, and around the world.
By becoming part of the VR international business brokerage network you will have access to businesses for sale in a wide range of locations.

Through the extensive amount of resources available from VR you will be able to establish a successful business brokerage office by choosing one of the many available locations.

Business Brokers or Business Intermediaries provide a valuable service to both buyers and sellers of businesses of all types and sizes.

Through the extensive training and resources provided by VR, you’ll be trained to perform all the key functions of a successful business sale transaction.

VR will assist you as a new Franchisee in all phases of opening a new brokerage office, from:

  • Planning and selecting a viable location
  • Marketing of your new VR office
  • Building a strong team
  • Setting up your new office website
  • Building a Customer base
  • And all the steps in between to achieve the closing of many profitable transactions.

Take the next step toward a successful and rewarding career with VR.

View our VR Presentation Videos & PDFs  explaning the tools and resources that will be available to you as a VR Franchisee.

For direct questions please call VR at 800-377-8722  or 954-565-1555

You can also go here to fill out a VR Franchise Information Request

 

More Successful Transactions by VR Business Franchise Owners

 SUCCESSFUL BUSINESS TRANSACTIONS

Alarm Systems Installation Company

VR Business Sales of Coral Springs, Florida, a leader in the sale of privately-held companies, recently facilitated the strategic sale of an alarm systems installation company for $1,200,000.

The transaction, which closed this month, was handled by Walter Rusak and Samid Gouar; business intermediary specialists.

Printing Distribution and Services Company

VR Business Sales of Asheville, North Carolina, a leader in the sale of privately-held companies, recently facilitated the strategic sale of a printing distribution and services company for $312,000.

The transaction, which closed this month, was handled by Robert Allen, a business intermediary specialist.

NEW BUSINESS ENGAGEMENTS

Taxi Company

VR Mergers & Acquisitions located in Sacramento, California, announced it has been engaged by a taxi company to assist in facilitating the sale of their business.

The company has excellent governmental relations, excellent future growth potential with 3 consecutive years of climbing revenues and profits. Go to VR Web Site for further details.

Established Signs and Graphics Business

VR Business Brokers, located in McKinney, Texas, the leading business intermediary firm in the area, has recently been engaged to assist in facilitating the strategic sale of an established signs and graphics business.

This company has a great 26-year history of serving the local business community. This is an excellent B2B opportunity – computerized signs and graphics for the business world. Click here for more details.

ADDITIONAL ENGAGEMENTS

Profitable ISO9001 Machine Shop, ON: $1,150,000
Landscaping Business, FL: $685,000
Amusement, Music and Gaming Operations, CA: $400,000
Architectural Woodworking Business, IL: $250,000
Italian Restaurant, PA: $150,000


VR is celebrating over 30 years as the world’s only network of full-time professional business intermediaries that addresses the needs of small and mid-sized businesses.

VR has sold more businesses in the world than anyone®.

Now is a Great Time to Become Part of VR!

View our VR Presentation Videos & PDFs  for more information on how you can become part of the successful VR Business Sales Franchise

or call our Director of Franchise Development at 800-377-8722  or 954-565-1555

 

How To Be A Business Broker with VR Business Brokers

VR  is seeking full-time, committed professionals with entrepreneurial drive to join our international  network of business brokerage offices worldwide.

While VR is selective when choosing those to join its network of professional intermediaries, we also provide the best training and resources available to ensure that all our VR Franchise offices are highly successful.

When you join VR and its network of professional intermediaries, you are choosing to team up with the nation’s premier business intermediary firm. You will have made the best decision to exponentially increase your efficiency, expertise and most importantly, your earnings.

Upon joining the VR Team you will have access to our extensive training program plus the resources and tools to ensure your success.

Training – Over 75 courses covering all aspects of gaining clients and closing business sales.

Business Development Plan – Gives you a full working plan and strategy to build and expand your office.  You can see a working demo in the VR Presentation Videos & PDFs.

Your Own Custom Office Website –  You’ll have a website starting with 10 pages for your location which can be expanded to whatever number of pages you like.

Business-for-Sale Website – All of your office engagements have their own business-for-sale website!

Buyer Alert Program – Potential buyers can sign up for the VR Buyer Alert Program, which will send them daily email notification of new businesses for sale that fall within their range of interests.

Proprietary Operating System (MLS) – The BizEx system is VR’s proprietary operating system that links together all VR offices.

VR Marketing Superstore – All the marketing tools and resources including direct mail materials, business cards, letter templates, and a wide range of promotional materials – which you can easily order on-line.

VR Publications – VR has three publications that are focused on three different target audiences to help to reach your market.

Professional Telemarketing Services – VR offers professional telemarketing services to its franchisees through a US-based third-party professional telemarketing company.

Client Relationship Management (CRM) Software

Accounting Software


Many of the features described here are explained in more detail in our VR Presentation Videos & PDFs.

You can call VR directly at 800-377-8722 to ask any questions you may have about beginning or improving your career by becoming a VR Business Broker.

Video of VR Business Brokers Franchise with Peter King & JoAnn Lombardi

VR BUSINESS BROKERS FRANCHISE OPPORTUNITY

VR State of the Company Video by Peter King  CEO & JoAnn Lombardi President of VR

 


You can also view our VR Franchise Webinar Videos here which explain many of the tools and training included in the VR Business Brokers Franchise.

http://www.vrbusinessbrokers.com/franchise  with Business Sales Franchises available in the US, Canada, and Worldwide.

You can contact VR Headquarters at 1.800.377.8722  to find out more details about the VR Franchise opportunity for your area.