If you want to acquire a business, you need equity. No matter what the amount of the purchase price, every (additional) financier wants the buyer to take some of the risk as well.
Because it is very simple: if an entrepreneur is already unwilling to take risks, why should a bank or other financiers?
Banks, as well as investors, want a buyer to show commitment. They want him to "suffer" if things go wrong, because only then will he put maximum effort into making the acquired business a success.
Possibilities of equity
There are some ways to raise equity so you can take over a business.
Family, friends & fools
If it is difficult to obtain financing or if your own network believes in your future plans, family, friends & fans may be able to help. Especially if you can make good agreements with each other about interest, repayment time and other conditions. However, it is wise to determine in advance whether your relationship can withstand possible setbacks. What happens if your lender within the family suddenly needs a lot of money himself or if you are tight for a month and cannot repay.
Surplus value of your own home
The capital gain on your own home can be a means to raise the required equity for a business acquisition. This is because if there is a capital gain in the home - if the appraised value is higher than the mortgage taken out - then that is considered equity.
Crowdfunding
Crowdfunding allows you to raise some of your own capital. Through a crowdfunding platform, you can ask "investors" to invest in your plans. There are several platforms that specialize in real estate financing. In exchange for funding, you offer interest, dividends, a share in the business or some other (tangible) compensation. Be sure to watch what you give away in exchange for capital.
Percentage of equity
The guideline for takeovers in SMEs is that the buyer must finance about 20 percent of the total purchase price (regardless of whether the price is 100,000 or 10,000,000 euros) with equity. Because again, every (additional) financier wants the buyer to also take some of the risk, so that he is fully committed to making the business acquisition a success.
