Financing the purchase of a business in Switzerland can be complex. It's rare for an acquisition to be carried out solely with equity. Buyers have several options available to structure a solid financial plan.
The different solutions for financing the purchase of a business
Bank credit: a classic but effective solution
Bank credit is one of the most common methods of financing the purchase of a business. Swiss banks can finance up to 60 % of the purchase price, depending on the size and potential of the target company. Repayment is generally structured over a period of five to seven years, depending on available cash flow. This option is particularly suitable for stable and profitable companies.
Key points to consider:
- The solidity of the business plan.
- The company's repayment capacity.
- The guarantees requested by the bank.
The seller's loan: an asset to complete the financing
When equity and bank loans are not sufficient, the seller's loan can be decisive. In this case, the transferor grants additional financing to the buyer. This loan, often subordinated to a bank loan, demonstrates the seller's confidence in the buyer and his project.
Benefits :
- Flexibility in repayment terms.
- Strengthening collaboration between the transferor and the transferee.
- Reduction of the initial financial burden for the buyer.
The “Earn-Out” method: an innovative approach
Increasingly popular, the "earn-out" method relies on deferred and variable payments. A portion of the price is paid immediately, while the remainder is adjusted based on the company's future performance. These variable payments can depend on criteria such as revenue or net profit.
Tips for a successful Earn-Out:
- Use transparent and difficult to manipulate indicators.
- Clearly specify the terms in the sales contract.
- Ensure that the interests of both parties are aligned.
Institutional aid: valuable support for financing the purchase of a business
In Switzerland, guarantee cooperatives play a key role in financing SMEs. By providing guarantees to banks, they facilitate access to credit. Regional cooperatives, such as Swiss Romande guarantee, CC Center, BG OST-SÜD, and the SAFFA Cooperative Guarantee Company for women, guarantee credits of up to 1 million francs for a maximum period of ten years.
Steps to obtain a bond:
- Obtain an agreement in principle from your bank.
- Complete the online surety application form.
- Submit your file to the competent authority.
- Meet the cooperative’s experts to finalize your project.
A surety bond is a contract by which a financial institution guarantees the repayment of a loan in the event of default. This solution secures banks and reduces the equity requirements for buyers.
Functioning :
- The organization guarantees reimbursement.
- It intervenes in the event of the company being unable to pay.
Use a credit intermediary to finance the purchase of a business
When seeking financing for the purchase of a business, it may be wise to seek a business credit intermediary. These professionals facilitate the process between you and financial institutions. Thanks to their expertise, they identify financing solutions adapted to your needs and the specific nature of your project.
The role of the business credit intermediary:
- Analyze the feasibility of your project.
- Develop a strong and convincing financial case.
- Put financial institutions in competition to obtain attractive conditions.
- Ensure complete follow-up until funds are obtained.
To resort to a business credit intermediary can transform a complex and time-consuming process into a smooth and streamlined one. These experts can not only help you secure the necessary funding to finance the purchase of your business, but also negotiate terms that will support the long-term viability of your project.
Conclusion for financing the purchase of a business
To finance the purchase of a business, several complementary solutions are available: bank credit, seller loans, earn-outs, and institutional assistance. Each option offers specific advantages based on your needs and the characteristics of the target company. Careful planning and tailored support are essential to ensure the success of your acquisition. Take the time to explore these solutions and seek expert advice to maximize your chances of success.
In short, successfully financing the purchase of a business requires combining several approaches, while relying on trusted partners.
