Ways to Finance Your Business Purchase By Matthew Franchise Anderson At Isnare.com Ezine Articles

When considering the purchase of an existing business (going concern) one of the first and most essential tasks you must do is seek qualified professional advice with regard to how best to arrange finance. Don't waste your own time struggling to get the numbers right; what you may be assuming may not even qualify with a lending institutions criteria. There are many places to go to get free, independent advice and/or alternatively you may choose to enlist the expertise of the professionals affiliated with one or other of the banks.

While your local bank may have been adequate when it came to arranging your residential loan, they may not have the required expertise needed to finance a business purchase. Choose to work with a specialist who is knowledgeable about not only structuring packages for business acquisitions but who will also be able to provide the back-up support which will be fundamental to every aspect of your business throughout its lifecycle.

Businesses go through cycles - quarterly, yearly, seasonal - these cycles may be short or long. The package you choose needs to provide for these cycles and more. It is desirable that the finance package presented combines flexibility with certainty. Certainty will help with your cashflow projections; knowing what your repayments will be month to month allows you to budget. Words of caution however, do choose wisely. For example, should interest rates decrease, it would undoubtedly be beneficial for you to be able to break from a fixed term loan without being penalized by draconian early repayment costs.

A progressive financial institution recognises that what is good for your business will also be good for their business. Consequently, they will be prepared to offer you the combination of flexibility and certainty that makes good business sense.

When calculating how much you will need for your acquisition, don't be overly conservative and borrow just the initial purchase price - go for more. One of the most universal reasons for a business to fail is due to undercapitalization brought about by inadequate cashflow. Even if you don't require immediate access to these extra funds your business will benefit long term from always having a sufficient buffer between you and possible emergencies, breakdowns, or fluctuations in the economy. This will ensure you are not playing a dangerous balancing game.

We are all familiar with using real estate as security for a loan; the same can be done with some of the other tangible and also intangible assets belonging to the business. Arrange the finance by leveraging against these assets. A skilled professional will offer recommendations on what is feasible and how best to achieve your goals. By using other people's money to fund growth you allow your existing cashflow to remain strong.

Establish what you want out of a finance package and then have the lenders demonstrate how they are prepared to win your business. Retain control of the entire process and always remember, you are the customer and the banks want your business.

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