Acquisition finance is the money you need to acquire a new business. Essentially, it's a loan that you take out in order to buy another company or merge with that company. This might be done by buying all the stock in that company, or simply buying the rights to the company with a cash deal.
As with any loan, an acquisition finance deal will require some background history to secure. A lender isn't going to throw money away; they want to know that your business is going to be able to pay them back. And while a normal, personal loan might involve a personal credit history, an acquisition finance loan might be a little more in-depth. As well as checking the credit history of your company, a lender might check the experience you have in managing a company, the history of profitability in your company, and the compatibility of your company with the new company you're trying to merge or buy out. Generally speaking, if you're going to be looking for a lender to provide acquisition finance, you're going to have to prove to them that you know what you're doing, and you're not making a mistake with their money.
One thing to consider with acquisition finance is the term you're getting. While it might not be attractive to put up real estate as collateral, it can get you a longer term. In fact, you can usually get a credit term over twice as long if you're willing to put up some property as collateral. This is simply because a lender is much more willing to take a risk on you if they know you're taking a risk on them. If your lender is giving you money on blind faith, you'll need to pay them off quickly in order to keep their trust. But if you're willing to put your own property on the line for them, they'll be much more trusting of your promises to pay by the deadline.
Any time you borrow money - whether it's through corporate credit or a personal home mortgage, you want to be certain that you know what you're doing. You want to know that you really need the money, and that it's worth the interest you may be paying on that money. You want to know that it's worth the debt, basically. So if you're considering acquisition finance, you will want to seriously consider the decision first. When you're acquiring a new business, you need to be certain that business will actually be a positive asset to you. You also need to know that you can handle that business, as well as your own. A merger doesn't help anybody if you end up sinking both companies. Make sure you know exactly what you're doing, and the company you're trying to acquire is a company that will compliment the assets you already have.
As well as considering the value of the company you're trying to acquire, you should also consider exactly how much money you're going to need. Some lenders may be willing to give you an outrageous amount of money, but you shouldn't borrow any more than you need. While it might be tempting to have all that money for your discretionary use now, paying interest on all that extra isn't going to be healthy in the long run. On the other hand, you should make a careful estimate, because you really don't want to run out of money. Getting one loan is hassle enough; you shouldn't have to go back to your lender and tell them your accountants messed up and you need more.
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