Top 5 Things to look for in Your Acquisition Financing Lender

Posted on: February 21st, 2025

acquisition-financing

Acquisition financing is frequently viewed through a transactional lens, without much focus on the attributes of the different type of providers. Often a buyer under focuses on the qualities of the acquisition financing provider, and cares solely whether they can deliver the loan and close. This lack of scrutiny of the underlying attributes of the acquisition financing provider – their backgrounds, credit culture, interpersonal skills, reputation, organizational risk tolerance is a big unforced error on the part of the buyer. Acquisition financing is essentially a long-term relationship that depends upon the level of trust and faith between lender and borrower. The only way to safely enter this type of relationship is to discern and evaluate various aspects of the lender in the same way a buyer evaluates important vendors or partners. Here are the top 5 things to look for in your acquisition financing lender:

Credibility- there are a lot of institutions who claim to have acquisition financing to lend but are merely brokering other people’s capital and have no say in the decision to lend. This can be detected through asking them how their credit decisions are made, who are the people in their credit committee and how large their asset base is.
Actively Lending – many acquisition financing lenders pretend they are lending when they are not making new loans. This happens when acquisition financing lenders are at the end of their fund or going through a tough stretch with existing borrowers.
Clear approval process – all acquisition financing lenders should be able to tell you exactly what the approval process is. It should not be nebulous or sound shifty.
Pragmatic as to business performance – Lenders need to understand causes of underperformance without being overly critical of management. They should seek to support the company over the long haul.
Good judgment – Lenders should exhibit reason free from passion especially in tough situations. They should strive to strike win-win solutions.

Sourcing acquisition financing is a specialized undertaking that involves collaborative processes orchestrated by a transaction expert. Like an orchestral conductor, this expert elevates organizational awareness of the acquisition financing lender’s standards while helping managers articulate the highpoints of the Company’s strengths and strategy. Acquisition financing lenders only lend to companies with ensembles of talented managers.

There is a decidedly pro-business mood in the air with the changing of the administration which bodes well for acquisition financing trends. The decision to engage in middle market acquisition financing is a big one for a business as it involves complexity, change management and resource commitment.