Financing a business acquisition is part of the concern on a buyer’s mind. Funding operations successfully is also a concern. When negotiating the acquisition, we often advise buyers to negotiate additional operational funding at the same time.
Operational funding may come from cash reserve. This would be self-funding, the easiest way to finance operations. The buyer may initially use his own funds for operations. However, the cash flow of the business should eventually finance operations.
Operations may also be funded by a line of credit with a bank, allowing the buyer to use the funds as needed and can be paid down as cash flow improves. Cash flow can be improved by using invoice factoring, i.e, financing slow-paying invoices.
Other sources of operational funding include SBA or bank loans, credit cards, crowd funding, pledging future earnings, securing an angel investor, and raising money from family & friends.