Alternative forms of funding in the current climate
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By David Martin 15.03.09
In this article David Martin recommends some alternative avenues and
methods that just might set you right.
The credit crunch has made it much harder to fund deals if you don’t
have ready cash. However, it’s not impossible, and the
dramatic drop in prices has meant that there are bargains to be had for
those able to be creative and innovative when it comes to finding
finance. It isn’t easy, but one business’ crisis is another’s
opportunity. Below are some suggested routes
-
Pay by issuing shares, although a seller is only likely to
agree to this if the shares being offered are listed on a stock
exchange so that a Seller has a reasonable chance of finding a buyer
when it wants to sell the shares.
-
Deferred consideration by which the seller effectively
helps finance the purchase by agreeing for payment to be spread over a
period of time, either as simple instalments or varying depending on
how well the business performs post closing.
-
Look beyond your main relationship bank as not all banks
have been hit equally hard by the crisis.
-
Offer the bank incentives, for example your ongoing
foreign exchange business, to help sweeten the deal for them.
-
Look to the private placing market, set for a resurgence
as fund managers move in to fill a gap in the market lending to healthy
and solvent companies left struggling to get credit.
-
When you have got funding, make exchange and completion
simultaneous, so that there is no risk of funding being withdrawn
during the gap between the agreement being signed and the ownership of
property changing hands.
© Davenport Lyons 2009. All rights reserved.
This document reflects the law and practice as at March 2009.
It is general in nature, and does not purport in any way to be
comprehensive or a substitute for specialist legal advice in individual
circumstances.
About the Author
Davenport Lyons [www.davenportlyons.com]
is an international business law firm based in the West End of London.
The firm
has an excellent reputation in areas spanning corporate to property,
defamation
to intellectual property, music to film finance and digital rights to
sport.
