Alternative Financing for Business Acquisitions
No matter how good or bad the economy, the need for the aging business owner to have an exit strategy continues to exist. Yet, when buyers are short on cash for equity and banks are tightening their lending guidelines, some businesses are difficult and perhaps even impossible to sell.
With the job market in a downward spiral, downsized executives often consider buying a business the only viable alternative to unemployment. Living on savings while job hunting may have reduced their available cash for equity and lenders are taking a more conservative approach with less risk exposure. An alternative financing source is needed to bridge the gap that remains between bank financing, seller financing and buyer equity.
Equitrade International, Inc. provides a solution in the form of barter finance. The commercial barter industry has evolved over the past fifty years into an electronic banking system. Barter transactions between businesses today are accounted for in credits and debits, much like cash in a bank account. Businesses barter to fill their excess capacity, which remains unsold after their best efforts to attract cash customers. The commercial barter industry today is a $12 Billion industry globally and barter credits received as payment for goods and services can be spent among hundreds of thousands of businesses nationwide.
Equitrade can facilitate the financing to bridge the gap between lender or seller financing and the buyer’s equity. Loan proceeds are in the form of barter credits, which are loaned to the buyer and paid into the seller’s new barter account with Equitrade. The buyer repays the barter credit loan from the acquired business, which offers its products or services to the barter market at large from its own excess capacity. In effect, the barter portion represents a perfect leveraged buy-out.
The seller now has a spendable currency that can be spent for a variety of products and services in lieu of cash at his own discretion. The substitution of barter credits for cash in the seller’s purchasing causes cash to be retained and in effect converts the barter credits to cash. The barter credit portion of the transaction most likely represents a portion of the goodwill that could not be financed and that was necessary for the seller to feel like he got his asking price. Even though the barter credits are not as liquid as cash, they serve to consummate a deal which delivers cash from equity and bank financing with a host of other benefits, including the creation of an exit strategy for the seller. And, having an account with Equitrade International, Inc. gives the seller control over his proceeds and allows the recovery of his sales proceeds sooner than with an unsecured note from a buyer.
Equitrade can offer mezzanine financing through barter finance for any viable business acquisition which meets certain criteria. Through its extensive list of business clients and affiliations nationwide, Equitrade can provide the spending opportunities necessary to redeem the seller’s barter credits for real estate, travel, home improvements, dining, entertainment and a host of other available items.