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19/12/2016

Funders' Wish List

Whether you’re buying or selling a business, understanding the expectations of any potential funders will ensure the transaction completes as smoothly and quickly as possible.

“Selling or buying an established business can have lots of positives and if you want to increase your chances of a successful sale it’s worth understanding what potential funders are looking for, whether you’re buying or selling. By keeping in mind the transaction what’s on the a potential funder’s ‘wish list’ you’ll have the best chances of success,” Chris Griffiths, a succession expert at Finance Wales explains.

1. A strong management team

Will the business be in good hands going forward? Demonstrating that there’s a planned handover to a strong management team will boost potential funders’ confidence.

2. Robust and reliable management information

Up-to-date management information will inspire confidence. By putting effective financial and operational processes in place it can help improve efficiency and control costs.

3. Formal contractual arrangements

Potential funders will want to know that you’ve agreed contractual terms with all customers and suppliers and that they’ll be unaffected by the sale of the business.

4. Profitability and cash generation

Any change of ownership is likely to increase a business’ debt levels, so potential funders will be looking for a solid track record of cash generation.

5. Order book and future revenues

A strong order book will help to convince potential funders that the business will be starting in a strong position under new ownership.

6. Existing debt levels

Potential funders are unlikely to back a transaction if a business already has high debt levels.

7. Vendor flexibility

Increasingly, vendors are being expected to agree a deferred consideration to help fund a transaction, demonstrating their confidence in the business and its future success.

Find out about more about our succession funding.