Whether its reading business publications, podcasts or messages shared at conferences and events, ‘growth’ is a concept that is on everyone’s lips… You should be growing your business!! What are you doing to grow your business? Growth, growth, growth…
For some businesses growth isn’t desirable and for others it can be a goal that seems difficult to achieve. In this current climate, some businesses are hunkering down and happy with maintaining their current client base, but if growth is for you, how are you going to achieve it?
Using finance to fund growth through acquisition
Recently I have noticed that businesses seem to be favouring acquiring another business as opposed to trying to grow organically. There are many articles written about the pros and cons of organic versus acquisition growth such as: https://www.bdc.ca/en/articles-tools/business-strategy-planning/manage-growth/organic-growth-mergers-acquisitions-choosing-right-growth-strategy
I guess it boils down to personal and/or professional preference about which you feel is best.
With this in mind, businesses for sale that have lots of assets can be a blessing in disguise for a potential buyer. That’s because it’s possible for buyers to refinance the assets of the business they want to buy and use the money to help pay for a portion of, or even the whole, business acquisition.
Of course, whether you can secure the funding depends on the assets and plenty of other factors, but this kind of financing can work quite well in the right circumstances. Find out more at: www.nextstepaf.co.uk/services/refinance/
Imagine a business that has several machines, a few trucks, and several vans that they own outright. These assets have a market value and, depending on their age and usage, could be used to release a significant amount of money to finance the business purchase. This scenario can be applied in several business sectors.
Affordable finance to help grow your business
Looking at this simplistically, securing finance against the existing assets of a new business you want to buy may make buying it more affordable as you would be paying a smaller monthly figure over a set period of time rather than having to find a large sum or even raiding cashflow and leaving a big hole in your current bank balance, with associated uncertainty that would bring.
How long would arranging funding take?
If growth by acquisition is your ‘thing’, funding the purchase this way could be an excellent, and relatively swift, method to acquire a competitor. It is easier and quicker than you think and could be a real game changer. The only thing you would need to do is your due diligence.
Once you have decided to progress the purchase of the business it can, worst case scenario, take up to 8 working days to have the funds released.
What other collateral would I need to secure the funding?
It is typical for underwriters to expect a Director’s Guarantee when conducting a refinance. Basically, this means that the director(s) agree to service the agreement in the event that the business be unable to make the payments.
However, would you be buying a business where you didn’t think that you could cover all the costs and make a profit? Therefore, if due diligence is conducted properly, this should mean that the guarantee is never called upon.
Refinance can be a very powerful mechanism to raise cash in general and, in this case, could potentially help your business take the next step forward. Something to consider for sure.
If you want to learn more about how this could work for you, please give James a call on 07703 188167 and we can arrange a chat and a coffee.
Next Step Asset Finance Ltd, Office 32, The Junction, Charles Street, Horbury, WF4 5FD M: 07703 188167 T: 0113 8879146 E: email@example.com