We recently invited Scott McGregor, Commercial Broker at Mortar Finance to a webinar on the topic, ‘Funding Your Next Business Acquisition.’
Here’s what we said -
First is the ‘Character’ of the business. A fairly decent and a sort of low risk approach in terms of their makeup and history. Second is the ‘Capacity’ to repay, which is like when you get a house and they want to check your income can repay the debt.
Next is ‘Collateral’ in case that scenario doesn't work, you should consider selling everything and still have your money back. And the last one is ‘CapEx’, is just making sure you're not buying something that needs heaps more cash anytime soon.
Understand what is planned for and if it is asset financed, the bank may provide a pre-approved asset finance limit so that when the time comes to replace that piece of machinery, the funding's already in place to convert and turn that over. At least you will know that you have got that side of things covered.