Once you’ve targeted the business you want, you’re going to have to think about money. Björn Lindvall, founder and CEO of corporate debt advisory CreditSquare, can help you with that.
Years of experience working with entrepreneurs whilst working for Credit Suisse and Morgan Stanley inspired his move to set up Credit Square – where existing businesses, or potential business owners, looking for extra capital can gain access to a wide range of alternative sources. To find out why the bank need no longer be your first port of call, read on:
1. What are the most popular alternative funding options available to business buyers today?
New government initiatives and increased awareness have resulted in alternative finance becoming increasingly popular among potential business buyers. In our experience, peer-to-peer lending remain the most popular alternative source of funds, and this notion is supported by data from AltFi that show over £1bn borrowed by UK businesses this year. An interesting space that has developed significantly this year is that of the challenger banks, which also provide a popular option. Compared to peer-to-peer lending, capital from challenger banks is generally more inexpensive, and their processes are shorter, and therefore favourable for potential business buyers.
2. What types of lenders do you work with at Credit Square?
With the exception of the High street banks, we at CreditSquare work with the full spectrum of lenders: peer-to-peer platforms, challenger banks, foreign banks, credit funds, as well as pension and insurance capital. The specific character of the transaction dictates which type of lender we reach out to.
What is your opinion of crowd funding as a means to financing a business purchase?
It's great that crowd funding exists as an option, and depending on the situation, crowd funding can be the most appropriate solution for the transaction. When considering acquiring a business, the borrower needs to look at all lending options available to them, and choose the best solution in the context of the particular situation.
3. How can a buyer leverage debt to buy a business – what are the options? What are the potential pitfalls of this method?
There are many options available.
Firstly, the buyer needs to think about what type of debt is right for the transaction. Options include fixed asset finance, receivables finance, cash flow loan, specialised asset based lending, and subordinated/ mezzanine debt.
Secondly, the buyer needs to think around how to structure the acquisition. What is the optimal split between equity and debt? Is the vendor open to defer part of the purchase consideration?
The most common pitfall when leveraging a transaction with debt is to not include enough equity into the transactional structure. To have 'skin in the game' is key for any lender. With so many options available, it can be useful to seek professional advice for this.
Remember, however, that it’s not all about the money. Click here to discover how to significantly reduce risk by buying an established business.
