Available capital is the first step when considering starting a business. In this article we want to show you what different options you actually have when it comes to financing a company.
Various options for company acquisition financing
You are probably already familiar with some of the options presented here, others may be new to you. However, it is important that you choose a model that suits your situation. To find out, we have divided all options into the 3 categories of equity, debt and mixed capital.
Equity doesn’t have to come from you in the first place. Financing partners can also help you to increase the amount of capital. It is recommended in any case that the share of equity should be around 15 to 20 percent.
In addition to the federal, state and local governments, the European Union also offers numerous funding programs for potential entrepreneurs. The good thing is that this money neither earns interest nor has to be paid back. It is more or less a gift, which at the same time makes it much more difficult to secure such a grant.
Equity capital is an external investor who provides you with capital without the collateral that is otherwise required. A distinction is made between open and silent participation. Open investments mean that the investor also appears as a partner and is involved in all rights and obligations. The silent partnership stipulates that the shareholder pays a contribution without receiving any shares. He will participate in the profits, but not in the assets.
Loans, or in other words debts, fall under debt capital. They can be obtained from different investors. Bank or private loans are usually typical for outside capital.
Getting a loan from your in-house bank usually requires good preparation. Anyone who appears without a detailed business plan or who denies the bank the opportunity to get an idea of the company’s prospective opportunities usually has bad cards.
Banks also usually process inquiries very slowly, which is why you should plan enough time.
Private lenders are usually family, friends, acquaintances or business partners. But as tempting as the idea may be, difficulties can often arise later. It is therefore advisable to always formulate loan agreements in writing. Any interest can often be deducted from tax as business expenses.
This is a mixture of equity and debt capital, which, however, is valued by banks like equity capital and can therefore increase creditworthiness.
If you want to buy a company, you can also get a loan from the seller. This loan can also be valued as equity, among other things. This is the case when the seller agrees to a subordinated loan. In the event of bankruptcy, the latter would only get the debt repaid after all other creditors. In this way, the buyer’s equity base can be strengthened.
But the grants and subsidies from the federal, state and local authorities already described above can also be considered mixed capital. The loan is not only added to the equity, but the buyer does not have to provide any collateral. However, he must disclose his qualification as an entrepreneur and personal liability is also mandatory.
Advice on company acquisition financing on Projektify
There are of course many other options for corporate acquisition financing. We at Projektify also started small and therefore decided to support you with this decision in the form of advice. Especially for this we have created a service that you here can use. But that’s not the only thing. If you have more questions, such as legal or tax issues, you are welcome to use our other services. It’s this way for that!
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