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.

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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. 

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