Though it is correct to suggest that all acquisitions are funded through some combination of cash-on-hand, debt, or equity, it’s also a bit of an oversimplification. Indeed, the financing options available to prospective acquirors are numerous, and in today’s blog post, I evaluate the most common sources of leverage used to finance the purchase of small and medium-sized businesses: These include bank debt, mezzanine debt, seller financing, contingent seller notes, and SBA 7(a) loans.

We also discuss how much debt to utilize in any given transaction, why the mezzanine business model can be so perilous, when to take less debt than the bank is offering to you, and why the lack of amortization that you value as a borrower is the very same feature that makes mezzanine lenders willing to lend to you in the first place.


Evaluating The Most Common Forms of Debt Used to Finance Small Business Acquisitions