Structures
Ten ways to fund an acquisition
Each one says what it requires, what the seller has to actually agree to, what rules it out, and what it costs you. There is no free money.
Seller carries it
No cash at closeSeller paid over time
Seller note
“You carry paper. I pay you out of the business you already built.”
It requires
- Seller is motivated but still operating
- Business covers the payment from its own cash flow
The seller has to accept
- Getting paid over time instead of at close
- Buyer default risk, usually secured against the assets
What rules it out
- Seller demands all cash with no flexibility
- Business cash flow cannot service the payment
What it costs you
- Interest
- A lien on the assets you just bought
- A seller who stays interested in your numbers
No cash at closePays on a milestoneSeller paid over time
Performance earn-out
“If the business does what you say it will, you get paid more. If it does not, we both found out cheaply.”
It requires
- A metric both sides trust and can audit
- Seller believes their own growth story
The seller has to accept
- Part of the price depends on results after they leave
- The buyer now controls the metric
What rules it out
- No verifiable metric
- Seller will not stay for a transition
What it costs you
- Upside, not cash
- A seller with a claim on how you run it during the earn-out
No cash at closeSeller paid over time
Lease to own
“I operate it and pay you monthly. Part of each payment buys equity. I close out at the end.”
It requires
- Seller will hand over operations before they hand over title
- Clear trigger for the final buyout
The seller has to accept
- Losing control before being paid in full
- A balloon they may have to chase
What rules it out
- Seller needs a clean exit for tax or personal reasons
- No enforceable path to title
What it costs you
- You run it without owning it
- A residual balloon at the end that still has to be funded
No cash at closePays on a milestoneSeller paid over time
Retention holdback
“A slice of the price sits in escrow and releases when the revenue it was priced on survives.”
It requires
- Concentration or churn risk worth insuring against
- An escrow agent both sides accept
The seller has to accept
- Part of their money sitting in escrow
- Release tied to something they no longer control
What rules it out
- Seller refuses escrow
- No measurable release condition
What it costs you
- Little, which is why sellers resist it
- Escrow fees and a slower close
Customers fund it
No cash at closeSeller paid at close
Pre-sell future revenue
“Existing customers pay for a year up front at a discount, and that cash funds the purchase.”
It requires
- An existing customer base willing to prepay
- Access to those customers BEFORE close, which the seller must permit
- Cash collected is not already spoken for by deferred-revenue obligations
The seller has to accept
- Letting a buyer approach their customers before the deal closes
- The reputational risk if the deal then dies
What rules it out
- Seller will not grant pre-close customer access
- Churn too high to honour annual commitments
What it costs you
- Discounted revenue
- A year of obligations funded on day one
- Deferred revenue that a future buyer will discount
Something you own
No cash at closeSeller paid over time
Leverage an asset you own
“I bring distribution, an audience or a service capacity the business needs, and that is part of the price.”
It requires
- A real asset the seller wants: audience, traffic, a customer list, engineering or service capacity
- A defensible valuation of it
The seller has to accept
- Taking something other than money as part of the consideration
- Your valuation of that something
What rules it out
- Seller wants cash only
- The asset cannot be valued without argument
What it costs you
- The asset's alternative use
- A seller who will dispute the valuation later if it underdelivers
Outside capital
No cash at closeSeller paid over time
Revenue-based draw
“A lender advances against the MRR the business already collects, and the seller gets cash.”
It requires
- Recurring revenue over the lender's floor (Replymer cites a $10K MRR floor for FounderPath)
- Draw sized against MRR (Replymer cites a typical 4-5x MRR draw)
- Verified processor data the lender can underwrite
The seller has to accept
- Waiting until post-transition for this slice
- Framed honestly: cash at close, delayed by 90 days
What rules it out
- Revenue is not recurring
- Lender requires a personal guarantee
What it costs you
- A fixed share of revenue until repaid
- A second creditor with a claim ahead of you
No cash at closeSeller paid at close
Investor equity
“An investor funds the purchase, I operate, and we split the cash flow on a waterfall.”
It requires
- An investor who backs the operator, not just the asset
- A preferred return and split both sides sign
The seller has to accept
- Nothing. This is invisible to the seller and reads as cash.
What rules it out
- No investor relationship
- Deal too small to be worth an investor's diligence
What it costs you
- Most of the upside
- A preferred return that gets paid before you do
No cash at closeSeller paid at close
SBA 7(a) loan
“A bank funds most of the price at a long amortisation.”
It requires
- US buyer and a qualifying business
- Months of underwriting the seller will wait through
The seller has to accept
- A far longer close
What rules it out
- The buyer refuses a personal guarantee. The Replymer playbook rules SBA out on exactly this basis: a personal guarantee kills the zero-out-of-pocket constraint.
What it costs you
- A personal guarantee, which is your balance sheet, which is the whole point of not doing this
Your own money
Your cashSeller paid at close
Cash at close
“I pay you now.”
It requires
- You have the cash
The seller has to accept
- Nothing. This is what every seller wants.
What rules it out
- You do not have the cash, which is the situation this whole tool exists for
What it costs you
- The cash, and every other deal you could have done with it
Run these against a real deal
Paste a listing and the stack gets built for that business, trimmed to what its cash flow can carry.