Buying an existing business with good cash flow

Discussion in 'Growing and Managing a Business' started by tristan1375, Mar 14, 2015.

  1. tristan1375

    tristan1375
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    Hello fellow users,
    I have a scenario and I am looking for funding advice.

    I have the potential to purchase a company for $1.3M, which is 4x TTM EBITDA. The company has been in business for 20 years, and manufactures its own product line.
    The seller is 74 and as such is reluctant to provide any seller financing. Myself and another manager at my current employer are looking to purchase together. His expertise is finance and mine is in Operations. The question is how to finance the deal. I do not have much cash to contribute personally, seeming to make a SBA loan difficult. I believe I could get $200k through family and friends. What would be your recommendation on how to fund the remainder of the purchase price? Private equity? Angel investors?

    Regards,
    Tristan
     
  2. stevepalladous

    stevepalladous
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    It's been a while since I worked in commercial finance, and I know things are more difficult than they used to be but depending on who the business sells to (eg if they sell to a lot of businesses and have a big list of Debtors) you may be able to obtain invoice finance (factoring etc) based on those assets.

    If not banks may be willing to take charges over other assets that you and your business partner have (eg your personal houses) to raise the cash.

    Bank finance tends to be 'cheaper' than private investors who always, naturally, want a share of the business which is very expensive in the long run, but if it's your only option... then it's your only option.
     

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