Acquisition financing typically consists of several elements as well as both equity and debt financing. Debt financing can also consist of a bank loan, and you can read our advice for acquisition financing from below.
Financing a business acquisition with a bank loan
Bank loans can be used as part of the financing package to fund sound acquisitions. Your bank may also suggest various leasing solutions as part of the financing package it offers. Whatever the financing method, the aim is always for you to pay off your debt within a reasonable period using the cash flow generated by the business. For this reason, cash flow is a key consideration when we assess the eligibility of the acquisition for financing and determine the right loan amount. When the buyer is a company, its repayment ability is an important factor. You can have a higher proportion of debt if profit generation and cash flow are stable and predictable. Conversely, you will be able to borrow less, or in some cases no money, if there are big fluctuations in profitability and working capital, there are needs for major further investments or operate in a challenging industry.
As the bank, we look at mergers and acquisitions from the point of view of risk management. You need to have a clear business plan and the competence to execute it. We will also look at the profitability of your business and the cash flow it generates. Other special considerations include your company’s competitiveness and competence, the compatibility of the operations and how professional the acquisition process is.