Before Contacting Business Acquisition Financing Lenders: 7 Numbers Buyers Should Verify

Before contacting business acquisition financing lenders, buyers should verify the numbers that will shape the financing discussion. A signed LOI or attractive asking price does not by itself show whether the transaction can support the proposed debt.

If you are actively evaluating a business purchase, complete the EIN Business Funding Quick Lead Pre-Qualification with the purchase price, amount needed, available buyer contribution and current credit profile.

1. What Is the Actual Purchase Price?

Start with the transaction amount being negotiated. Separate the purchase price from inventory, working capital, closing expenses or other capital requirements that may exist outside the stated price.

2. What Is the Target Company’s Annual Revenue?

Revenue helps establish the scale of the business, but it should not be reviewed alone. Funding providers may also examine cash flow, current obligations and repayment capacity.

3. How Much Cash Flow Is Available to Support New Debt?

The acquired company still needs to pay employees, suppliers, rent and other operating expenses after closing. Buyers should understand how much operating cash flow remains available after those obligations.

4. What Existing Debt Does the Business Carry?

Identify current loans, credit lines, equipment obligations and other business debt. Existing obligations can materially affect the financing profile.

5. How Much Can the Buyer Contribute?

Know the amount of capital you can realistically invest without leaving yourself or the acquired business short of liquidity immediately after closing.

6. What Is the Remaining Financing Gap?

Subtract the available buyer contribution and any other committed capital from the total transaction requirement. That remaining amount is more useful to a funding provider than a vague request for the maximum financing available.

7. How Much Working Capital Will Be Needed After Closing?

Inventory, payroll, vendor payments, equipment repairs or other operating needs can require additional cash shortly after ownership changes.

What Should the Buyer Prepare Before Pre-Qualification?

Have the purchase price, requested financing amount, current Experian FICO score, buyer contribution, target-company revenue, cash flow, existing debt and intended use of funds ready.

If these numbers are available and the acquisition is active, complete the EIN Business Funding pre-qualification before approaching multiple financing providers.

Questions Business Buyers Ask

What should I know before contacting an acquisition lender?
Know the purchase price, business revenue, cash flow, existing debt, buyer contribution, financing gap and post-closing capital need.

Does strong revenue guarantee acquisition financing?
No. Funding providers may also review cash flow, debt, buyer strength and repayment capacity.

Should working capital be included in the acquisition plan?
Yes. Buyers should understand what capital the company may need immediately after closing in addition to the purchase price.