O&MM Fabricator - March/April 2017 - 37

* Using the Seller's Assets. So-called assetbased lending has become an increasingly
popular source of financing. Asset-based
loans are revolving loans secured by the
available collateral, such as inventory,
accounts receivable, equipment, and
fixed assets. Finance companies and banks
often lend money on inventory. Equipment
can also be sold, and then leased back
from equipment leasing companies. The
amount that can be borrowed is typically
between 65 percent and 80 percent of the
asset's book value making it a useful tool
in acquisition financing.
* Seller Financing. It is quite common for the
seller to finance part of the transaction. The
simplest way to provide seller financing is
for the buyer to make a down payment and
for the seller to carry a promissory note
for the balance of the purchase price. The

business and its assets provide the primary
collateral for the note.
The terms (interest rates, length, principal
payments, and so on) will vary depending on
the negotiated agreement. For an ornamental and miscellaneous metal fabricator who
sells for $500,000, for example, the transaction
might be structured as $150,000 down from the
buyer and $350,000 in seller financing. The
seller's note might run for five to seven years
and carry an interest rate of eight percent to
10 percent. Monthly payments usually start
30 days from the date of sale.
* Joint Venture. Where an acquisition may be
out of reach for one metalworking business,
buying in conjunction with another party
may make the acquisition affordable. To find
a likely partner, ask the seller for a list of
those who were interested in the business,
but did not have enough money to buy.

* Paying for the Targeted Business with
Stock. Issuing stock allows a buyer to make
an acquisition without using its own cash
or borrowing money (or by using less cash
and borrowing less money). And no, issuing
stock isn't limited to the stock exchange
listed, big businesses. However, although
a fabricator might be tempted to issue more
stock to finance its purchase, careful consideration should be given to the dilution of
the value of the metalworking operation's
stock. Is issuing more stock really the best
course of action, or does borrowing money
to finance the acquisition make more sense?
* Assume Liabilities or Decline Receivables.
The sales price can be reduced by either
assuming the business's liabilities or having
the seller retain the receivables - if any.
* Bank Financing. If the targeted business
has a lot of assets, positive cash flow and a
strong profit margin, bank financing may be
available for the buyer. Unfortunately, there
has been a significant decline in cash flowbased loans with the quality of the business'
cash flow, debt load, and insufficient collateral frequently cited as the primary reasons
for rejection. In fact, the type of collateral
pledged is emerging as the most important
factor in a number of lender's decisions to
approve - or shoot down a loan.
Finding a bank with a history of financing
the type of business being acquired quite often
will increases the chances of successful bank
financing. If the seller has a strong banking
relationship, talking with the seller's banker
might prove successful. Talking to a number of
banks in order to secure acquisition financing
might be another strategy.
Getting Sophisticated with
Mezzanine Financing
Mezzanine Financing is a hybrid of debt
and equity financing and, not too surprisingly,
often sponsored by the SBA. A mezzanine deal
involves a number of technical terms: senior
and subordinated debt, private-placement
transactions and equity investment. Senior
debt refers to loans from sources such as
banks and secured by liens on specific corporate assets, for example, property or equipment. Equity is usually in the form for preferred
stock. As a buyer, the metals fabricator won't
have to give up as much control; frequently it
appears footing the bill for 20 percent of the
price of the target company.
Naturally, with mezzanine financing or when
funding any acquisition, to get the best possible
March/April 2017 * O&MM Fabricator | 37



Table of Contents for the Digital Edition of O&MM Fabricator - March/April 2017

President’s Letter
NOMMA Network
Nomma Education Foundation
Dodge Planroom
The Hossfeld Bender
Common Challenges With Cable Railing Installations – and How to Overcome Them
2017 Top Job Winners Showcase
Skilled Employment Practices
Financing Acquisition Growth and Profits
Supplier Members
New Nomma Members & Iron Club Members
People
Products
Gargantuan, Pet-Inspired Fountain Center Stage in Canadian Park
Index of Advertisers
O&MM Fabricator - March/April 2017 - cover1
O&MM Fabricator - March/April 2017 - cover2
O&MM Fabricator - March/April 2017 - 3
O&MM Fabricator - March/April 2017 - 4
O&MM Fabricator - March/April 2017 - 5
O&MM Fabricator - March/April 2017 - 6
O&MM Fabricator - March/April 2017 - 7
O&MM Fabricator - March/April 2017 - 8
O&MM Fabricator - March/April 2017 - 9
O&MM Fabricator - March/April 2017 - President’s Letter
O&MM Fabricator - March/April 2017 - 11
O&MM Fabricator - March/April 2017 - 12
O&MM Fabricator - March/April 2017 - NOMMA Network
O&MM Fabricator - March/April 2017 - 14
O&MM Fabricator - March/April 2017 - Nomma Education Foundation
O&MM Fabricator - March/April 2017 - Dodge Planroom
O&MM Fabricator - March/April 2017 - 17
O&MM Fabricator - March/April 2017 - 18
O&MM Fabricator - March/April 2017 - 19
O&MM Fabricator - March/April 2017 - The Hossfeld Bender
O&MM Fabricator - March/April 2017 - 21
O&MM Fabricator - March/April 2017 - 22
O&MM Fabricator - March/April 2017 - 23
O&MM Fabricator - March/April 2017 - 24
O&MM Fabricator - March/April 2017 - Common Challenges With Cable Railing Installations – and How to Overcome Them
O&MM Fabricator - March/April 2017 - 26
O&MM Fabricator - March/April 2017 - 27
O&MM Fabricator - March/April 2017 - 2017 Top Job Winners Showcase
O&MM Fabricator - March/April 2017 - 29
O&MM Fabricator - March/April 2017 - 30
O&MM Fabricator - March/April 2017 - 31
O&MM Fabricator - March/April 2017 - Skilled Employment Practices
O&MM Fabricator - March/April 2017 - 33
O&MM Fabricator - March/April 2017 - 34
O&MM Fabricator - March/April 2017 - 35
O&MM Fabricator - March/April 2017 - Financing Acquisition Growth and Profits
O&MM Fabricator - March/April 2017 - 37
O&MM Fabricator - March/April 2017 - 38
O&MM Fabricator - March/April 2017 - 39
O&MM Fabricator - March/April 2017 - 40
O&MM Fabricator - March/April 2017 - Supplier Members
O&MM Fabricator - March/April 2017 - 42
O&MM Fabricator - March/April 2017 - New Nomma Members & Iron Club Members
O&MM Fabricator - March/April 2017 - People
O&MM Fabricator - March/April 2017 - 45
O&MM Fabricator - March/April 2017 - Products
O&MM Fabricator - March/April 2017 - 47
O&MM Fabricator - March/April 2017 - Gargantuan, Pet-Inspired Fountain Center Stage in Canadian Park
O&MM Fabricator - March/April 2017 - Index of Advertisers
O&MM Fabricator - March/April 2017 - 50
O&MM Fabricator - March/April 2017 - cover3
O&MM Fabricator - March/April 2017 - cover4
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