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Commercial Banking > Business Succession > Financing the Business Transition > Acquisition Financing Options

Acquisition Financing Options

There are a variety of financing options available, including:

Your RBC® Commercial Account Manager can advise you on the financing options designed to support the unique needs of the business acquisition.

 

Bank Financing

  • most affordable and easiest to acquire
  • available through operating loans secured against accounts receivable and inventories
  • also available through term loans, leasing and commercial mortgages to finance capital assets (real estate, machinery)
 

Mezzanine Debt

  • also known as subordinated debt
  • may be appropriate for businesses that are highly leveraged or those that lack the business assets to finance through bank financing alone
  • carry higher fees and rates and may require giving up some ownership interest
 

Equity Investment

  • suited to companies that operate with limited tangible assets or those that have maximized their borrowing potential
  • investors become partners in the business with decision-making rights
  • future business’ profits repay the investor
 

Vendor Take-Back Loan (VTB)

  • seller supports the financing of the acquisition in the form of a loan or becomes an investor in the business
  • ideal for business owner who does not need immediate access to funds and wants to retain some control over the transition of the business
  • seller will continue to bear some of the risk of the business
 

Shareholder (Buyer) Equity or Loans

  • buyer uses personal funds to finance the acquisition, either in whole or in part
  • buyer may have to borrow – the resulting loans may be secured against personal assets
  • the amount of the buyer’s equity will also be a factor in determining other financing options