Acquisitions
How Business Acquisition Financing Works
What buyers should understand about structuring financing for the purchase of an established business.
Financing the purchase of an established business is different from borrowing for an operating company you already own. Lenders are underwriting both the buyer and the target — its historical cash flow, customer concentration, transferability, and the reasonableness of the purchase price.
How the capital stack often comes together
Acquisition financing is frequently a blend of sources, which may include:
- A senior loan (often SBA 7(a) or conventional)
- Buyer equity injection
- Seller financing or an earn-out
- In some cases, mezzanine or other subordinated capital
What strengthens an acquisition request
Consistent, verifiable cash flow at the target; relevant buyer experience; a fair and well-supported valuation; and a clear post-close transition plan all tend to strengthen a request. Deals are subject to lender criteria and approval, and thoughtful structuring early can prevent surprises later.
This overview is general information, not financial, legal, or tax advice. Every situation is different, and all financing is subject to lender criteria and approval.