Acquisition Financing Has a Steep Learning Curve
If you want to purchase a business, you’d better have lots of paitence, a thick skin, and the ability to learn fast as acquisition financing has a fairly steep learning curve.
The reason that there is so much complexity comes from the need to have a business financing plan that meets the needs of three parties, namely the buyer, vendor, and third party lender or investor.
The vendor is mentioned here in that in many cases, the vendor is expected by the third party lender to participate in the overall financing package, especially if there is any amount of goodwill involved.
The other aspect of complexity is the amount of due diligence that can be required by all the different parties. The reason for so much assessment and review is to determine not only the current financial health of the business being sold, but also the business’s ability to transition to a new owner without having a detrimental impact on the future financial performance.
When you get to the point where a third party lender or investor wants to participate, the structure of the proposed financing may not be acceptable to either the buyer or the vendor.
In order to make any small business financing proposal work, all parties will likely have to work together and perhaps compromise in order to make the deal work.
As a result, its not unusual that deals fall apart somewhere along the way when the parties cannot find a solution that will address all the needs and concerns of all the parties involved.
