Acquisition finance refers to the different sources of capital used to fund a merger or acquisition. Where alternative lenders are concerned, this most often involves equity financing, debt financing and/or mezzanine financing. The challenging part is to obtain an appropriate mix of financing that offers the lowest cost of capital.

By seeking out financing for an acquisition, a business can access the funds it needs immediately. This saves the time that would otherwise be needed to raise capital to buy another business, which allows the transaction to be completed more quickly and smoothly.

A bank might be more inclined to approve financing if the company to be acquired has:

• A steady stream of revenues
• Steady or growing EBITDA (a cash metric that would help the acquirer pay back the debt obligations from the loan on the acquisition)
• Substantial or sustained profits

Valuable assets for collateral