02 Nov State of the credit markets for business acquisitions
Debt financing remains available for business purchases, it’s just more cautious than it was a couple years ago. Much more cautious. My firm has closed a few deals in this climate but banks have been burned and they must operate conservatively to ensure they have enough capital to withstand any bad debt losses they may suffer in the coming months and years. Bankers are also less willing to overlook risk factors in deals such as customer concentration, product concentration and earnings volatility. Nobody knows how soon the economy will improve, or to what degree, but the safest thing is to be conservative.
The deals that are getting done today are reasonably priced (i.e. the price being paid for the business); have tangible assets that fully collateralize the debt; and plenty of equity in the capital structure.