Acquiring a trading business may require funding for the purchase price, assets and initial working capital. Lenders assess both the business and purchaser.
What acquisition finance may cover
Depending on the structure, funding may relate to tangible assets, goodwill, equipment, property, an asset or share purchase, and initial working capital.
What lenders assess
Expect review of historical financial statements, tax returns, profitability, cash flow, forecasts, debt serviceability, the purchaser’s contribution, management experience, security and industry conditions.
The sale agreement, leases, asset lists, business bank statements, identification and personal financial details may also be requested.
Due diligence and risks
Review contracts, leases, employees, stock, liabilities and the reasons for sale. A lender’s assessment is not a substitute for independent legal, accounting or tax due diligence. Goodwill can be difficult to value, and performance may change after ownership transfers.