Taking over a company without any contribution… The idea seems possible and yet. Let’s take a look at the possibilities of financing a takeover.
There are two complementary methods to take over a business without any contribution: borrowing and investors’ participation in the company’s capital.
In both cases, it is your ability to convince your contact that will be decisive in the success of your project. And to persuade the seller that his company has every chance of survival.
Steps to take over a business with no money down
How do you prove that the business will generate sufficient profits to repay the loan or guarantee a return on investment?
- Carry out a market study: as for the creation, it is a compulsory step to take over a company. The document allows you to understand the environment in which the company evolves. Thus, you identify your customers, your direct and indirect competitors, the regulations in force in your sector, etc. Based on the elements gathered, you can then position your offer.
- Draw up a solid business plan: this is your business strategy. If you have the ambition to take over a company without any contribution, it means that you have a very precise idea of what you want to do with it. This is the time to formalize this policy in a forecast document. As complete as possible, this exercise should help you to calculate the prospects of turnover, profitability, cash flow requirements, etc.
- Take a look at the public aid available. Contact the Observatoire des aides aux entreprises, a database of 3,000 references, with all available national public aid sorted by need, by sector, by department or by funder.
- Ask for an honorary loan : the support networks such as Réseau Entreprendre or Initiative, offer loans at zero interest, without guarantee or personal surety. This is a good way to build up a nest egg before contacting other investors.
- Targeting investors: this involves creating a holding company and opening up the capital to investor organizations. The parent structure can then raise funds via crowdfunding, investment funds or business angels.
- Contact the most daring bankers: it is only when you have raised these funds that you can request a bank loan. First, apply to the public investment bank Bpifrance for a transmission development contract dedicated to SME takeovers. Then, target the banks that already work with companies. Keep in mind that the basic conditions require a repayment over 7 years and that the authorized credit rarely exceeds 70% of the acquisition price.
However, we must remain realistic
In most operations of more than one million euros, you will be required to make an equity contribution. Ideally, this contribution should be 30% of the amount of the debt.
If you use equity investors, they will often require a contribution commensurate with your financial capabilities.
Finally, you will also need cash to finance a lawyer, an auditor or even a financial advisor (cost between 10,000 and 50,000 euros).