Buying A Manufacturing Business – A Finance Option You Should Consider

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Finance OptionAt Accelerated we’re in the process of selling a 30+ year old company in the Pump & Valve sector. The company has sales of over 2.2 million, cash-flow over $650K and a strong industry reputation. A great story right? Even so, I didn’t expect what happened next…

The company has banked for years at a small local bank. When the bank got wind of the fact that the owner had the business on the market, they aggressively pursued both the owner and me, the broker. They want us to provide an introduction to the buyer, and to say that they are eagerly making the request would be an understatement. But it makes sense doesn’t it? They know that if a buyer goes to a different bank for financing, they will move their accounts there as well. This smart bank realizes they don’t want to lose the customer and will provide a buyer with funding to make the acquisition in order to secure the business. It’s funny, they’ve been trying to get my client to borrow money for years, to no avail. He laughs when he tells the story of his response to the bank saying, “You guys have a funny habit of wanting the money back after you lend it! No thanks, I don’t borrow.” Yet the bank still pursues because they know how much of this company’s money they have the pleasure of holding each year.

We’ll gladly pass on the contact information to the buyers. It’s good business if I can help them get a good rate. This strategy should be considered for other service providers as well. Consider having the Seller’s insurance company provide you, the buyer, with a quote. An insurer that knows the company’s history and risk may provide a better insurance product at a cheaper rate.

The acquirer of a manufacturing company should always consider the company’s current bank as a financing option!

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