Time Frames For Funding Transactions

We recently invited Scott McGregor, Commercial Broker at Mortar Finance to a webinar on the topic, ‘Funding Your Next Business Acquisition.’ 

And we were asked, “Can you provide some insight around time frames?  How long do the transactions take?”

Here’s our answer –

It is bank specific and potentially the size of the transaction as well. From a business banking point of view, the banks have SME type areas, and they have larger departments that look after different sized businesses. The size of the business and the funding requirement can impact on the turnaround. If there’s a specific industry policy that we’re working towards, that can impact on the turnaround. For instance, if we’re working under a specific industry policy that goes to a banker that is specialised in that industry, that may turn around quicker than if we’re in a general business environment that’s not industry specific. 

We would have a conversation with a number of different banks, as well as their policies and processes and interest rates. We would also be asking them how long it’s going to take them to put an application together. And the difference between 4 and 6 weeks, or 1 and 2 weeks could be the difference in the lender that we actually choose to go to because there might be a business that you’ve got a due diligence or finance clause on that you need to meet.

If we are aware that there is 30 days due diligence, then we are going to look to lenders that are going to be able to deliver an outcome within that 30 days. As a rule of thumb for buying a business, a due diligence period of probably 60 days is at a minimum because there are a number of things that need to be worked through with a business purchase, a little bit different to a home loan. You will need to engage accountants and solicitors to do due diligence around the lease, around vendor financials, preparing a forecast, and doing a business plan. 

If you are looking at funding against assets within that business, the bank may need to get valuations done on those assets and may want to value the business depending on the type of business that it is. Those processes can take longer than a residential purchase contract, where we might be reviewing some PAYG payslips and a purchase contract. The nuts and bolts of getting a business application together can take longer. It is generally recommended a minimum 30 or ideally 60 days as a due diligence process just to make sure that you’ve covered off on everything within that process but that means you have made the right decision when you buy that business.

Watch the full webinar, ‘Funding Your Next Business Acquisition’ at https://learning.benwalker.com/courses/fundingbusinessacquisition