Q: I am in the process of buying out a business where I’ve worked for a few years. While I’m debt-free, and have a mortgage on my house paid up, I have very few savings. The current owner of the company has said that he is willing to sell for €200,000, which I’d consider to be a reasonable valuation – truth be told, he could possibly obtain more if he sold to a third party. I’ve spoken to my bank, and they’re willing to lend me €150,000 against the value of my home. Where can I go to for the rest?


A: Well done, firstly, on getting this far. This funding gap can often crop up when you’re acquiring an existing business, and you have a few options for overcoming this.


You can start by looking at the ‘top line’ of money that you have to raise. Is it possible to push the price down a bit? As a member of staff, you know the company’s strengths and where it can improve – an external buyer may not see the same value in the business. Even if the headline price is not negotiable, you could propose deferring part of it – for example, paying €150,000 up-front and the remaining €50,000 over four years – with or without interest. This is a common enough practice in the process of acquisitions. An alternative would be for the owner to retain their 25% stake in the company, ideally with an agreed purchase price for the remaining stake at a later date. This gives you breathing room to raise the money you need for completing the transaction and ensures the current owner sees some return.


If you can’t do anything about the price, or the timing of the payments, you’re probably looking to enlist another lender (which may unnerve your bank) or investor. This can be a difficult process but, as an experienced member of the presumably successful business, you’re attractive as a partner to someone who prefers a hands-off role. In a past blog, we’ve offered advice on where you can find an external investor for your business. Just make sure that, when dealing with investors, you get proper non-disclosure agreements and some legal protection against them hijacking the deal – better yet, look for a reputable individual as well as someone with money to invest.


Whenever you’re dealing with transactions like this, it pays to have independent, experienced advice. We deal with many entrepreneurs and potential entrepreneurs so, if you want to arrange an initial no-obligation meeting, just get in touch.


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