When you want to take over a small business, you have to find the purchase price somewhere. It rarely comes from a single source. Acquisition financing is therefore built from several blocks that together cover the price. The goal is a mix that fits you and that the business can carry on its own.
The first block is you: your equity. It shows the bank that you have skin in the game. As a rule of thumb, expect to bring in roughly 15 to 25 percent of the purchase price. The more you contribute, the easier the rest becomes. The largest share is then usually covered by a bank loan from your house bank.
On top of that come two useful additions. A subsidised loan brings favourable terms and repayment-free early years. A seller loan lets the seller defer part of the price. Both ease your cash position in the critical first phase and show the bank that the seller believes in the deal too.
If you lack collateral, because you cannot pledge a property for instance, that need not sink the loan. A guarantee from a guarantee bank then takes on part of the default risk toward the bank. Often it makes the financing possible in the first place.
The core rule is this: the takeover must pay for itself out of the earnings of the business. The bank checks your business plan carefully to see whether the ongoing cash flow services the instalments and whether a decent owner's salary still remains for you. If the deal only works on paper, the price or the financing mix is usually wrong.
For business sellers
A realistic price and clean numbers make your buyer's financing far easier. Someone who cannot convince the bank cannot buy. A well-prepared teaser and open figures pay off directly here.
With a seller loan you can close a financing gap for your buyer and make the sale happen. It signals confidence in your business and makes you noticeably more attractive to serious successors.
For corporate buyers
Talk to your bank early and clarify how much equity you can realistically contribute. This determines which businesses are within reach for you at all. Always build in a buffer for unexpected costs after the handover.
Combine the blocks deliberately: a subsidised loan, a seller loan and, where collateral is missing, a guarantee can together add up to exactly the financing your house bank would not put together on its own.
Example
Marco takes over a small bike workshop in Winterthur for 300,000 euros. He brings in 60,000 euros of equity, his house bank grants a bank loan of 150,000 euros, and a subsidised loan adds 40,000 euros with two repayment-free years. The seller defers the final 50,000 euros as a seller loan over four years. That leaves Marco enough room in his cash flow to service the instalments and pay himself an owner's salary.
FAQ
How much equity do I need for a takeover?
As a rule of thumb you should bring in roughly 15 to 25 percent of the purchase price as equity. Sometimes less is possible if a strong seller loan or a guarantee fills the gap. With no money of your own at all, it becomes hard for the bank.
Is it better to buy or to start from scratch?
When you buy, you take over a running business with customers, revenue and a settled team. The cash flow often carries the financing from day one. A start-up begins at zero. That is why banks tend to finance a business succession with provable numbers more readily than a pure idea.
What does the bank check before financing my takeover?
The bank looks above all at your business plan and whether the ongoing cash flow reliably services the instalments. Your qualification, your equity and the available collateral also matter.
What happens if I lack collateral?
Then a guarantee, for example from a guarantee bank, can step in and take on part of the default risk toward the bank. This often makes financing possible even if you cannot pledge a property or other assets.
Why is a seller loan so helpful for my financing?
A seller loan closes the gap between your equity plus bank loan and the purchase price. On top of that, it works as a vote of confidence toward the bank: the seller believes in the business so much that they are willing to wait for part of the money.
How do I make sure I can afford the instalments?
Work through your business plan honestly to see how much of the earnings is left after all costs. The instalments come out of that surplus, and an owner's salary should still remain afterwards. If there is no buffer, the price or the subsidised loan mix is calculated too tightly.
Back to glossary
