Business acquisition
Acquisition financing helps you buy an existing business, a competitor or a partner’s stake. Lenders weigh the target’s cash flow, the price and your experience running it.
Key points
- Acquisition financing helps you buy an existing business, or buy out a partner.
- Lenders focus on the business’s cash flow and whether it can cover the new payments.
- Most deals combine a lender, your own money and often seller financing.
- A careful review of the business before you buy protects you and the lender.
What is acquisition financing?
It’s financing to buy all or part of an existing business. Unlike a start-up, the business already has customers, staff and a track record, so lenders can base their decision on real results. The business’s own cash flow is what repays the loan.
How a deal is usually put together
Few acquisitions are financed by one source. Most combine three.
| Source | Typical share | Why it matters |
|---|---|---|
| Your own investment | 10% to 30% | Shows lenders you’re committed |
| Vendor take-back | 10% to 25% | The seller lets you pay part of the price over time |
| Lender financing | The rest | Based on the business’s cash flow |
An example
You agree to buy a business for $1,000,000.
How NorthMerit can help
Apply once and we’ll connect you with one financing partner who works with businesses like yours. It’s free, and there’s no obligation.
What lenders look at
Expect lenders to review several years of financial statements and tax returns, confirm that cash flow comfortably covers the new payments, and look at your experience in the industry. A transition plan, showing how you’ll keep key staff and customers, makes a strong application stronger.
Reviewing the business before you buy
Due diligence means checking the business is what the seller says it is. Review the financial statements, major contracts and customers, staff and payroll, debts, leases and any legal issues. Many lenders require a professional valuation. The most common mistake is paying for growth the business hasn’t achieved yet, so base the price on current earnings.
Common questions
How much do I need to put down?
Can the seller help finance it?
Industries that use it.
Health care and clinics
Clinics and practices finance specialized equipment, fit-outs and practice acquisitions.
Learn moreProfessional services
Firms grow through hiring, acquisitions and partner transitions, often with few hard assets.
Learn moreTechnology and software
Software and tech firms grow on people and recurring revenue rather than hard assets.
Learn moreFitness and personal care
Gyms, salons and spas invest in fit-outs and equipment, and often buy or expand locations.
Learn moreFranchises
Franchisees finance franchise fees, build-outs and equipment, often to a franchisor’s set standards.
Learn moreThe right financing, from the right partner.
Apply once. One financing partner who knows businesses like yours. Free, with no obligation.
