By Mark Smock

April 23, 2004

You’ve just walked out of a business owner’s office, who has

grown an established, profitable business that he is willing to

sell to you, for very favorable purchase terms, at a fair

price, but you have no clue how you are going to raise the

necessary capital required to complete the purchase. Sound

familiar?

Pursuing a viable company to purchase is a very competitive

process. Money is often the most critical weapon a business

buyer has to differentiate themselves from all the other

business buyers who are also fortunate enough as you to have

found the same great business acquisition candidate as you

have. If you don’t have the funds to compete in the business

acquisition market place, you will quickly become a

consequential example of the old mergers and acquisition

industry adage, “No dollars, no play, no deal!”

Most seasoned business buyers will tell you that they are not

always looking for “a deal” in a business acquisition, but to

purchase a company for reasonable terms that offers a

consistent, high return on investment, with little or no buyer

competition.

Astute business buyers focus on leveraging their investment

dollars first and foremost, seeking to acquire controlling

interest in a viable company for the least amount of their own

money. Business purchase terms can be very diverse, as can

means to finance a deal. Terms of purchase are often perceived

by both the business seller and buyer as the most critical link

to their eventual purchase agreement, much more so than just

purchase price.

Sometimes You Have to get “$ Creative”

When you find an extraordinary business acquisition opportunity

that initially exceeds your current financial wherewithal, you

need to be get very creative and resourceful, very quickly, to

be able to achieve your desired outcome. Again, your objective

is to negotiate and finalize a reasonable purchase contract

with the business seller, using as much of his or his company’s

money, or anybody else’s money you can secure and still

maintain management control of the company post purchase.

There are four fundamental areas a savvy business buyer can

pursue to attempt to get the necessary funds to finance

controlling purchase of a profitable company acquisition:

Business Buyer Personal Funds:

* Cash Savings

* Liquidate paper investments

* Negotiate a private party loan from a friend or family

   member

* Advances from personal credit cards or negotiated delays in

   outstanding credit card balance payments

* Obtain a  bank loan secured with high value, personal assets,

   like your home or car(s)

* Negotiate payment delays on buyer’s current outstanding bills

* Barter or trade significant equity positions in personal

   assets for required business assets

Take on Partners:

* Aggressively pursue a minority ownership partnership with the

   current owner

* Bring in a trusted new partner – sell him shares in the

   company

* Sell shares of the company to existing employees

* Sell shares of the company to existing company vendors or

   suppliers

* Sell shares of the company to other business buyers

Pursue Every Funding Source:

* Include, increase, the earn out portion from the company’s

   future earnings

* Sell revenue participation certificates (Bank collects/

   disburses funds)

* Bank loan to the business

* Asset loan to the business

* Loan from current business supplier(s) or vendor(s)

* Finance or sell off all existing excess inventory in the

   company

* Sell high value assets and lease them back or finance them

* Sell high value equipment outright and time share or borrow

   other like equipment

* Accelerate company receivables

* Factor company receivables

* Seek customer deposits against existing orders

* Lease a high value asset and get advance lease payments from

   the lessee

* Sell excess or low use assets

* Sell the company customer list

* Sell on-business-premise concession space

* Sell the parking lot land

* Sell trademarks or unused licensing rights

* Sell or sublet the part of the business building and get

   advance payments

* Sell “junk” or obsolete inventory accumulated for cash

Reconfigure Outstanding Business Purchase Balance Arrangements

* Pursue as much seller financing as possible

* Defer the down payment portion as long as you can

* Assume more or other liabilities not originally in the

   purchase contract

* Negotiate a value for a buyer’s personal check put in escrow

* Let the seller retain all receivables

* Discount liabilities due the company for immediate cash

   payment

* See if the business intermediary will finance their

   transaction commission

* Assume seller’s personal debt’s or liabilities

* Negotiate extended payment terms with key suppliers

* Inventory all primary materials on consignment terms

* Finance all acquisition fees involved in the transaction;

   consultants, CPA, etc

Professional business buyers who have faced a “challenge” like

this in their career will tell you that it is no fun being in a

situation like this, but they’ll always refer to it as “worth

it” when, over time, the anticipated business performance came

to fruition and more than justified the initial level of

financial risk leveraged to “do the deal”. They rarely mention

however, that trying to get all parties to agree to your

finance limitations and loan terms, in rapid fashion,

simultaneously, can be hazardous to your health! It’s worth a

shot, don’t you think?

About the Author:

Mark Smock is President of www.business-buyer-directory.com, the

FIRST international business buyer directory of its kind.

Business Buyer Directory provides a non-traditional means for

proactive business buyers to locate businesses for sale

worldwide that meet their exact registered purchase criteria