Acquisition Financing: The Strategy Behind Successful Business Acquisitions

Expert insights from Ben Hangge, SVP Commercial Banking Manager

Buying or selling a business is one of the most significant financial decisions a business owner can make. Whether the goal is growth, expansion, succession planning, or retirement, acquisition financing can help turn opportunity into reality.

Highland Bank's SVP Commercial Banking Manager, Ben Hangge, has spent more than a decade helping business owners, entrepreneurs, and investors navigate acquisition financing. Through every transaction, his focus remains the same: helping clients understand their options, prepare for the process, and achieve their long-term goals.

Unlocking Opportunity Through Acquisition Financing

Acquisition financing provides funding for a change in ownership of an operating business. It can support everything from an entrepreneur purchasing their first company to an established organization expanding into new markets through strategic acquisitions. It is also commonly used to facilitate succession planning, ownership transitions, and employee stock ownership plans (ESOPs), helping business owners create a path forward while preserving the legacy they've built.

Today's business landscape has created growing interest in what many call entrepreneurship through acquisition, where buyers acquire existing businesses rather than starting from scratch. According to Ben, this approach has become an increasingly important driver of small business growth, allowing entrepreneurs to build on an established foundation while creating opportunities for future expansion.

As buyers begin exploring acquisition opportunities, one of the first realities they encounter is that every transaction is unique. Funding structures, equity requirements, and timelines can vary significantly based on the size of the business, the complexity of the transaction, and the financing solution selected. While some transactions may require a larger capital investment from the buyer, others can be structured to make business ownership more accessible.

The timeline is equally important to understand. Although every acquisition follows its own path, financing is only one piece of a larger process that often involves negotiations, due diligence, legal review, and coordination among multiple parties. Having experienced advisors involved early on can help set realistic expectations and keep transactions moving forward efficiently.

SBA vs. Conventional Financing

While both financing options can support a business acquisition, the right solution depends on the transaction size, the buyer's experience, and available capital.

SBA financing is often a strong fit for entrepreneurs looking to purchase a business but who may not have substantial capital available. Backed by the U.S. Small Business Administration, these programs are designed to increase access to financing and help make business ownership more attainable for qualified buyers. As an SBA Preferred Lender, Highland Bank can make certain lending decisions on behalf of the SBA, helping create a more streamlined and efficient process for borrowers.

Because SBA loans typically require a smaller equity contribution than conventional financing, they have become a popular option for first-time business owners pursuing entrepreneurship through acquisition. Instead of building a customer base, team, and operations from the ground up, buyers can acquire an established company with existing infrastructure and cash flow. SBA financing can help bridge the gap between a buyer's available capital and the funding needed to complete an acquisition.

Conventional financing is commonly used for larger acquisition opportunities or buyers with greater access to capital. These transactions typically require a larger equity investment and place a strong emphasis on the company's ability to generate cash flow.

Unlike commercial real estate loans that rely heavily on property value as collateral, acquisition financing is largely centered on cash flow. Lenders want to understand how the business will support debt repayment while continuing to operate and grow successfully under new ownership.

The financing structure ultimately depends on several factors, including the purchase price, financial performance of the business, available equity, and the buyer's overall goals.

Setting Yourself Up for Acquisition Success

Whether you're preparing to sell a business or looking to purchase one, preparation can play a major role in the success of the transaction.

For sellers, attractive acquisition candidates are businesses that can operate successfully beyond the current owner. Buyers often look for experienced management teams, diversified revenue streams, stable financial performance, and documented processes that support a smooth transition. Businesses that show consistent growth and are not overly dependent on one customer, employee, or owner tend to be more attractive in the marketplace.

For buyers, preparation means taking the time to fully evaluate opportunities rather than rushing into the first available deal. Understanding financial performance, management structure, customer concentration, growth opportunities, and industry dynamics can help uncover risks before closing and lead to more informed decisions.

Ben also emphasizes the importance of surrounding yourself with experienced advisors. Acquisition transactions frequently involve attorneys, accountants, bankers, and other professionals who each play a critical role in the process. Working with advisors who understand acquisitions can help identify potential challenges early and create a smoother path to closing.

"Preparation and having the right advisory team in place are critical," Ben says. "Whether you're buying or selling, working with professionals who understand acquisition transactions can make all the difference."

Expert Guidance That Goes Beyond Closing

After more than a decade focused on acquisition financing, Ben has worked with everyone from first-time business buyers to experienced investors and private equity groups. One lesson has remained consistent throughout those transactions: no two deals are exactly alike.

Acquisitions often involve unexpected challenges, shifting timelines, and complex deal structures. Having an experienced banking partner can help clients navigate those situations, identify solutions, and maintain momentum throughout the process.

What continues to drive Ben's passion for acquisition financing is the opportunity to help people navigate important milestones, whether that's transitioning into retirement, purchasing a first business, or expanding into new markets. He views every transaction as more than a loan, seeing it instead as the beginning of a long-term relationship built on understanding a client's goals and supporting their growth. As financing needs evolve over time, Ben remains a trusted resource, helping business owners pursue future opportunities with confidence.

His advice for business owners considering an acquisition is simple, "Take your time, prepare thoroughly, and build a team of experienced advisors who understand the process. With the right strategy, guidance, and financing structure, acquisition financing can create opportunities for growth, ownership transition, and long-term success."

Ready to explore acquisition financing opportunities? Connect with Ben Hangge and Highland Bank's commercial banking team to start the conversation.