If you’ve got expansion on your mind, it’s time to start exploring acquisition financing. Acquiring another brand or pursuing a merger can pave the way for expanded market share and increased profitability. Here’s what you need to know to make an informed decision for the future of your business.
What Is Acquisition Financing?
Acquisition financing is a method your business can use to secure funds specifically for buying another company. This type of financing helps your business expand rapidly without depleting its cash reserves.
You can leverage borrowed capital to gain assets and tap into a larger customer base. Whether you’re looking to acquire a competitor or enter a new market, acquisition funds are an excellent solution.
There are different lending strategies you can explore when seeking acquisition financing. One common approach is asset-based lending. In this scenario, you would use your existing inventory, equipment, real estate or accounts receivable to secure the loan. The ABL approach can be a good option if you have a notable amount of assets and would like an alternative to traditional financing.
Mezzanine financing is another lending tool that can support your acquisition goals. This hybrid funding method combines equity and debt features. You’ll receive capital at a higher interest rate than with traditional loans, which are secured by your ownership stake or the company’s assets. Mezzanine financing preserves your equity stake and offers flexibility, allowing you to customize terms and repayment schedules.
The Basics of Mergers
Mergers combine two or more companies into a single entity, often to create competitive advantages or expand resources. By merging with another business, you can increase your market reach and tap into valuable resources or infrastructure to support long-term growth.
When planning a merger, you must consider the financial, operational and cultural impacts that the move will have on both businesses. Working with a financing expert can help you navigate the complexities and avoid common pitfalls.
How Barrington Commercial Capital Can Help
Determining what type of acquisition financing best aligns with your long-term goals and business needs can be challenging. That’s why you need the support of an experienced financial team in your corner.
At Barrington Commercial Capital, we specialize in customized financing solutions for business owners, entrepreneurs and commercial entities. Our team will help you weigh the benefits and potential drawbacks of various financing options so you can identify the right option for your company. Contact us today to discuss how we can help secure the best financial options for your business.
