Questions about equity capital and liability are essential points that need to be answered in the context of a financing application. In the second part of our practical tip, we answer essential questions on structuring a financing request.

4. do I have enough equity capital and can I secure the financing amount appropriately?

As a rule of thumb, the financing of business successions can be realistically structured with an equity share of between 10 and 20 percent. The equity share can also be provided through appropriate collateral, such as a mortgageable property or life insurance policies.

If there is not enough equity capital available, support can be provided not only by banks’ own investment companies but also by the development institutions of the Länder (such as the MBG in Lower Saxony) or private investors with subordinated capital. But be careful: in addition to comparatively higher interest rates, lenders also demand collateral for this.

5. am I prepared to accept joint and several liability in the event that there is little or no collateral.

For most financing of business successions, the transferee will have to provide a joint and several guarantee. This also applies in particular to financings promoted by development banks - such as the KfW. The exemption from liability of the development bank applies vis-à-vis the acquirer’s bank. On the other hand, development banks almost always insist on full liability of the transferee for the financing,” says management consultant Thomas Dörr.

6. what are the minimum documents that must accompany a financing request?

Upon request, many banks immediately send their potential financing customers an overview of the documents required for business financing.

The following documents are in any case part of a promising application for follow-up financing:

The business figures or annual financial statements of the company to be acquired for the last three years.
The business assessment (BWA) of the company to be taken over for the current year.
A meaningful business plan together with a profit forecast for the next three to five years.

In addition to this, start-ups and sole traders are often asked for a CV, the last tax assessment, a self-disclosure about their financial situation and an authorisation to carry out a Schufa query.

Here we go to the first part, which deals fundamentally with the financing of business successions, the ability to take over, the business plan as well as the professional and personal characteristics of the transferee.