Have you already built your laundry business from the ground up? Are you now ready to buy another business and continue to grow your company?
If so, then you could be ready for acquisition financing. You don’t have to go it alone as you strive toward your expansion dreams, and investing in another business can actually be a more cost-effective, intelligent way to go.
Here is what you need to know about acquisition financing and how to grow your laundry business well into the future:
What is acquisition financing?
To begin, it helps to learn a little bit about acquisition financing. Unlike startup capital or another type of funding, acquisition financing is designed for the sole purpose of purchasing another business.
In most cases, your current company will have restricted cash flow, if not just for the simple fact you have steady monthly income and expenses. This can make it tricky to expand, even if it is the right move for your business. This is where acquisition financing comes into play.
Like other types of financing, this version commonly occurs in the form of a loan or line of credit, and it can be an ideal strategy to turn a business from one single store into multiple ones.
The key elements behind acquisition financing
While acquisition financing is a viable source of funding for business owners, there are steps you can take to facilitate the process.
Here are a few tips:
1. Prepare your own capital
Laundry owners will be expected to provide a certain amount of capital in addition to the loan or line of credit. This typically falls within the 20 percent to 50 percent range. Therefore, it may be beneficial for you to ask around for aid from family, friends or even investors. This will help offset some of the risk of putting up your own funds early on in the process.
2. Ask about seller financing
Another key component of acquisition financing is seller financing. Here, the seller of the business can actually pitch in during the funding phase, perhaps because he or she wants to ensure the deal goes through or for any beneficial tax breaks. Since it is the seller involved, they could be more willing to work on low rates, favorable terms and other perks. Sometimes, simply having seller financing makes the deal – and your business – more attractive to lenders.
“Business success can help you land financing.”
3. Highlight business success
In nearly all cases, you will be buying a like-minded laundry business. It is because of this that your previous experience – and success – comes into play. In order to ensure financing, and get favorable terms, you’ll want to highlight your skills and profits from your existing laundry business. Use all your positive anecdotes and statistics to show lenders and investors you are for real – and you can do great things with this new business.
Get as much information as possible
The final step is to come prepared. Learn everything you can about your own business, the one you want to acquire and the financing you’ll need to make it all happen.
That way, you’ll be ready for anything. Many times, lenders ask for detailed financial information before giving out a loan. It will be the case here. So, know the important facts from your own business – cash flow, revenue, profits, expenses and so on – and be ready to share. Also make sure your proposition is viable. Prove that buying this business is a smart decision, and show that through facts.
With that said and done, you’ll be well on your way toward acquiring your next laundry business.