Asset & Invoice Finance for Business Acquisition
A business owner has agreed to seller finance half the business acquisition value, but the other half I wish to finance it through the Asset & Invoice Finance of the business.
How do I go about doing this since I am not yet a director of the business?
Thanks for your question. In order for you to use Asset & Invoice Financing, you’ll just need to have the current business owner provide all of the information that the lender needs. You’ll also need to be upfront that you’re using the money to fund the business. Many lenders won’t want to do it because it leverages the business more if you’re using it to purchase, but some won’t care. You may also want to consult with the seller because some sellers wouldn’t like that you aren’t bringing any of your own money to the table.
If this is the route that you want to go, make sure that the seller understands the financing structure beforehand so there isn’t frustration as closing nears.
If you’d like more information on financing a business acquisition, you can check out our ultimate guide on How to Get a Loan to Buy a Business here: https://fitsmallbusiness.com/how-to-get-a-loan-to-buy-a-business/
One particular alternative that you might want to consider is a Rollover for Business Startups, which allow you to use your own 401k or IRA assets to help fund the acquisition of a business. If you want more information on how ROBS work, be sure to check out our ultimate guide here: https://fitsmallbusiness.com/rollover-business-startups-robs/
Best of luck!