Business acquisition loans enable an entrepreneur to own a shared business. If you want to own a shared business of your own, this article will help you how to finance your business with a business acquisition loan.
Are you taking over a business? This can be a real challenge for an entrepreneur or a person in professional retraining.
Such a project presupposes not only precisely assessing the potential of the targeted company, but also successfully arranging the financial arrangement for the operation. To achieve this, you will need to build a solid business plan and a creative financial package, with a good knowledge of the financing of shares. We will also take stock of the acquisition of a business. Follow the guide to business acquisition loan takeover!
The benefits of business takeover
- You inherit an existing activity and therefore a clientele, a brand, a set of production tools, service providers, etc.
- You benefit from a higher business continuity rate;
- You finance the project more easily: the lenders are more inclined to grant loans in the takeover of a business because they can base themselves on the balance sheets of past years;
- You can pay yourself a salary more quickly.
How to get a business acquisition loan?
In order to succeed in your financial arrangement, you can apply for different sources of financing for business acquisition loan:
The personal contribution:
You must generally bring 25% to 30% of the amount of the purchase. This contribution proves your motivation and interest in the project.
Your family or friends can get involved in the recovery through donations, business acquisitions, loans or equity investments.
You can have access to a system which allows the granting of a loan at zero interest, or to subsidies granted by local public actors;
The seller can grant you a business acquisition loan as a part of the takeover. This solution generally applies when the assignor and the buyer know each other.
Credit from SMEs:
Through the transmission development contract relating to takeovers of SMEs, access to loans of an amount ranging from $50,000 to $800,000. No guarantee or personal surety is required. This business acquisition loan must however be backed by a bank loan.
The business acquisition loan taken out with a bank as part of a business takeover generally does not cover more than 70% of the total amount of the operation. Guarantees will be required, including personal guarantees and the pledge of the business or shares.
Succeed in the financial package for business acquisition loan:
The choice of the financial transaction: In the context of the business takeover, two scenarios are available to you:
The repurchase of the goodwill: in this case, your repurchase concerns only the recovery of the work tool. You do not take over the debts of the company.
The redemption of securities (shares or shares): In this context, you become the owner of the company. The repurchased securities cover all of the items appearing on the balance sheet on the date of repurchase, i.e. assets, receivables, cash, debts, etc.
Must Read: A Complete Guide to Business Loans
Borrow under good conditions:
Once you have identified the activity you wish to take over, the first step prior to financing it consists of putting together a financial file. You will thus be able to decide on a redemption relating solely to the fund or also involving the recovery of securities.
During the construction of the financial package, make a personal contribution corresponding to at least 25%-30% of the acquisition price.
Before approaching financial organisations for a business acquisition loan, be certain that nothing is set in stone: everything can be negotiated (deadlines, interest rates, guarantees, etc.). It is important to surround yourself with experts to benefit from the most advantageous conditions. Our Financial experts can help you.
Funding of SCPI shares:
SCPIs are Real Estate Investment Companies, intended to invest in business real estate. The SCPI makes it possible to invest in offices or businesses that are difficult to access – directly – for an individual.
But buying SCPI shares involves financing, unless the entrepreneur can use his own funds.
There are 4 types of SCPI share financing:
Cash financing: This is the case where the company already has the necessary funds. In return for his investment and the number of shares held, he will receive the corresponding rents.
Financing via life insurance: The insurer pays for the purchase of the shares and the rents are placed in the life insurance contract. In this configuration, the contract fees will be applied to the rents.
Financing by dismemberment: This technique makes it possible to reduce the amounts of taxes via the single subscription to the bare ownership of the shares. At the end of the dismemberment, the contractor will be the sole owner and will receive all the income.
Financing by a bank loan: Essentially in the event of a lack of equity, the real estate loan SCPI will make it possible to finance the purchase of shares while deducting the interest of real estate business acquisition loan from the land income.
The constitution of his financing file and the care given to his bank file will be very important. Do not hesitate to call on a broker to accompany you at each stage.
The takeover of a business
For any entrepreneur wishing to create a business from existing elements (such as the trade name, the right to lease, the clientele but also the furniture, the equipment and the possible stocks), taking over a goodwill represents a good solution.
A goodwill indeed contains all the intangible and tangible elements relating to the trade. However, it does not include ownership of the store premises, nor outstanding debts and receivables.
The first step in the financing of the goodwill will be the evaluation of its value, in particular with the help of an accountant and then thanks to a market study.
It is then up to the entrepreneur to choose how to finance the takeover of this goodwill: personal savings already constituted, participative financing (or crowdfunding) or professional credit.
In the last situation, all the financial elements of the business will be studied by the bank: turnover of course, but also amounts of rent, salaries, charges and operating costs.
The takeover of a goodwill finally includes a written assignment and a deed of sale.
Business acquisition loan takeover under the best conditions
We give you access to the best financing conditions. By using our services, you benefit from:
- A detailed and complete knowledge of current market conditions (rates, rent, guarantee, etc.)
- Competition between local funding bodies
- A network of financial partners to respond to the specifics of your case
- We offer you the possibility of obtaining much more advantageous conditions than if you planned to carry out the procedures yourself with financial institutions.
A set of services to make your business takeover a success
- With CAFPI, obtain attractive financing conditions and benefit from a support service. Our experts negotiate for you
- Payment schedules and repayments adapted to your situation
- Professional business acquisition loan insurance in the event of the death or disability of the entrepreneur.
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