Four Primary Financing Options

One way or another, there has to be some form of financing for an ownership transition to occur where one or more parties are putting capital at risk to make the deal happen.

D. Brown Management Profile Picture
Share
Succession: 4 Primary Deal Financing Methods.

There are four primary sources of financing and most deals will utilize a combination of these.  

  1. Seller financing where the current owner takes their money over time. This may come in the form of:
  1. Outside capital from the buyer with the most likely scenario for a significant amount of outside capital coming in from a strategic buyer.
  1. Bank financing of an ESOP.
  1. Bank financing on a term loan for buying the business. This will typically require some combination of outside capital and seller financing, along with proven financial performance, a proven management team, and all 5C’s met. 

Succession
Continue building value in your business, yourself and your key team members with a good succession strategy....

Succession
Continue building value in your business, yourself and your key team members with a good succession strategy....

The Basic Math of Business Transitions
Ownership succession for a construction business is complex. Sometimes it is best to back up and look at a really simple model to keep the three primary parties focused on what is truly important.
Planning a Project - 2X Organizational Chart
A contractor would never start to build a facility by trying to design and build a room or two at a time. Contractors must apply that same planning time horizon to their organizational structures.
Cash Flow Tip 5 - Flowchart Your Cash Flow
You can only see the full value-stream of cash flow including the waste, the people and the opportunities for improvement by mapping out every step.