As one of the fast-growing services offered to business owners by Bridge Business Credit, acquisition financing is a powerful way for one company to seek and secure funding to purchase another company.

In a recent interview, Bridge CEO Rhett B. Rowe discussed the purposes and intricacies of acquisition financing, what companies need to know before proceeding, and how Bridge Business Credit serves the acquisition market.

Q. Is acquisition financing a normal or a newly growing part of your business?

Rowe: “Acquisition financing has been a longstanding part of the asset-based lending business, although its prominence may vary depending on marketing conditions, economic trends, and industry dynamics. While asset-based lending has traditionally been associated with providing working capital solutions based on the value of a company’s assets, including accounts receivable, inventory and equipment, it has also been utilized for financing acquisitions. Bridge Business Credit plays a vital role in facilitating acquisitions by providing flexible and responsive financing solutions tailored to the needs of acquiring companies.”

Q. What types of companies are you seeing interested in acquisition funding?

Rowe: “Companies interested in acquisition funding typically fall into several categories. They include strategic buyers who seek acquisitions to expand their market presence, diversify their product or service offerings, gain access to new technologies or distribution channels or achieve other strategic objectives aligned with their long-term growth plans.

“Other parties include financial buyers, such as private equity firms, family offices and venture capital funds, which focus on acquiring companies with the goal of generating returns for their investors. We also see interest from management teams seeking to acquire the businesses they manage from current owners or shareholders, entrepreneurs and founders, and distressed asset buyers.

Q. What types of companies/situations are best suited for acquisition financing?

Rowe: “Bridge Business Credit is often utilized in situations where companies need short-term financing to facilitate acquisitions, especially when traditional bank financing may not be readily available or when timing is critical.

“Companies that may benefit from this type of financing include fast-growing companies – businesses experiencing rapid growth may need financing to quickly seize acquisition opportunities without waiting for lengthy approval process from traditional lenders. There are also turnaround situations – companies undergoing restructuring or turnaround efforts may require financing to acquire distressed assets or to fund operations during a transitional period.

“Management buy-outs also benefit from Bridge financing,enabling management teams or investors to acquire companies while permanent financing is arranged. And there are sometimes special situations – companies facing unique circumstances, such as time-sensitive acquisitions, or businesses operating in industries with seasonal or cyclical cash flow patterns may turn to us for a more tailored approach and expedited financing options.”

Q. Have companies you’ve dealt with tried traditional banks before coming to you?

Rowe: “Yes, it’s very common for companies to explore traditional bank financing options before considering Bridge Business Credit for their financing needs. Traditional banks including commercial banks and investment banks are often the first choice for companies seeking financing due to their familiarity. However, traditional banks may not always be readily available or suitable for certain companies or transactions. Factors such as the company’s financial condition, creditworthiness, industry risk, collateral coverage and the nature of the acquisition may influence a bank’s willingness to extend credit. That’s where Bridge Business Credit can help.”

Q. How much of a percentage of a firm’s purchase price are you willing/able to finance?

Rowe: “Bridge has funded up to 100% of the purchase costs based on sufficient collateral, however, the median target is 90%.”

Q. What type of acquisition financing does Bridge typically manage?

Rowe: “Our method of funding is a direct loan to the entity holding the assets serving as collateral. Moreover, each financing solution involves accounts receivable financing; the collection of which is applied to the debt owing via a DOF (dominion of funds) arrangement with the entity’s depository institution. We generally require personal recourse from any person owning 25% or more of a borrowing entity.”

Q. How does a client go about obtaining acquisition money through Bridge? What’s the application process?

Rowe: “Obtaining acquisition financing through Bridge Business Credit is simple. It involves a team of experienced professionals that walk the client through the entire process from start to finish, beginning with assessment of financial needs and tailoring solutions to fit those needs. Once the proposal is accepted, our team schedules an introductory call with underwriting and field examiners to discuss the next steps in the process. Due Diligence occurs at that time beginning with a scheduled onsite visit with our field examiner.

“The final step after all parties reach an agreement is the preparation of the loan documents for signatures. At that time, a closing date is scheduled, and initial funds are prepared to be released.

“Overall, Bridge Business Credit is committed to offering a comprehensive suite of flexible and rapid financing solutions that empower businesses to execute their strategic objectives while navigating the intricate terrain of acquisitions and seizing opportunities for growth. By providing tailored support and responsive assistance we not only facilitate the achievement of corporate goals but also foster resilience and competitiveness in the dynamic landscape of today’s market.”

Located in Troy, Michigan, Bridge Business Credit was founded in 2002 to serve companies with potential that are unable to obtain conventional financing. Bridge structures flexible financing with asset-based lines of credit. Eligible collateral categories include accounts receivable; inventory; machinery and equipment; as well as owner-occupied commercial real estate.