The SME Acquisition Financing Playbook

Build uses, not only purchase price

Include transaction costs to be confirmed, debt refinancing, additional working capital, immediate CAPEX and liquidity reserve where relevant.

Build the cash bridge

Move from operating earnings to cash after tax, working-capital movement, sustaining CAPEX, normal management cost and other recurring outflows. Evidence each adjustment.

Run three scenarios

Base, downside, and severe but plausible. Show effect on debt service and liquidity, not EBITDA alone.

Buyer evidence

Identity, vehicle, UBO, authority, available equity, source-of-funds evidence where required, relevant financial history, co-investors and funding timetable.

Lender pack

Buyer profile, target, rationale, price/terms, available history, business plan, cash bridge, existing debt, security, sources & uses, governance, key risks, diligence status, timetable and conditions precedent.

Compare instruments

Cross-border

For UEMOA, check Regulation 06/2024, banking route, currency, documentation, declarations/authorizations and timing. Purchase-price transfer is not a remittance transaction.

Funding-readiness stop conditions

Stop if equity is unconfirmed, critical finance terms have expired, lender conditions conflict with transaction documents, liquidity headroom is absent, financing depends on an unmandated source, or FX/funds route is unresolved.

Decision checklist

• [ ] Sources & uses balances.
• [ ] Post-close working capital funded.
• [ ] Downside case tested.
• [ ] Equity evidenced.
• [ ] Debt uses realistic terms.
• [ ] Security package understood.
• [ ] Bank-closing mechanics documented.
• [ ] Co-investor governance agreed.
• [ ] Legal/tax review triggered where required.

DealPME mapping

P08 buyer qualification → P14 offer/LOI → P15 diligence → P16 partner-led closing. DealPME coordinates evidence and status; the financing partner owns the credit decision.

Review trigger

Refresh whenever price, term sheet, funding source, rate, legal structure or exchange-control requirement changes.

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Lender file : recommended structure

Prepare a financing file that can be read independently from the full VDR: executive transaction summary, acquisition thesis, sources & uses, legal structure, financial history, EBITDA/cash bridge, debt schedule, working capital, CAPEX, management, customer concentration, downside, security package, approvals, KYC/source of funds and closing timetable.

Every model number should point to evidence or a named assumption.

Debt: test capacity, not appetite

Build base, moderate downside and severe-but-plausible cases. For each show revenue, margin, working capital, CAPEX, tax, debt service and minimum cash. Covenants and ratios are lender-specific; this playbook does not impose a universal threshold.

The question is: can the business continue to operate and invest after servicing debt?

Bank term sheet : fields to map

Amount/currency, maturity/amortisation, rate and margin, fees, security, guarantees, drawdown conditions, covenants, cash sweep, distributions, events of default, reporting, change of control and prepayment.

Coordination with the seller

Funding can change the offer through financing conditions, timing, proof of funds, refinancing of existing debt, seller finance, partner escrow and CPs. Parties should know which conditions are buyer-controlled and which depend on the lender.

Financial closing

Use a dedicated checklist: equity called, verified accounts, final KYC, security documents, finance CPs, required confirmations, funds-flow instructions, existing debt pay-off, minimum cash reserve and drawdown confirmation.

After closing

Start a monthly covenant/liquidity dashboard from month one: cash, collections, working capital, CAPEX, debt service, headroom, covenant events and lender reporting. Sound financing must remain governable after signing.

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Lender process : from approach to final credit

1. Financing teaser, transaction, sector, size, need and sponsor.
2. Indicative appetite, initial questions, possible range and security.
3. Information pack, model, history, debt, contracts, management and KYC.
4. Term sheet, non-final structure, conditions and lender diligence.
5. Credit approval, internal lender decision, often subject to CPs.
6. Documentation, facility documents, security and corporate approvals.
7. Drawdown readiness, conditions satisfied, equity funded, accounts and funds flow verified.

Do not describe stages 2 or 4 as definitively available financing.

Security package discussion checklist

This playbook does not recommend a particular security structure. It records what the lender requests: share security, assets, accounts, receivables, guarantees, insurance, covenants or distribution controls. Qualified advisers should confirm title, ranking, consent, registration cost and impact on future flexibility.

Existing-debt refinancing

Identify debt repaid at close, debt remaining, prepayment fees, releases, security discharge, accrued interest and bank confirmations. A net-debt error can change the equity cheque directly.

Co-investor governance

Before counting co-investor equity as a source, document commitment, timing, conditions, voting, reserved matters, dilution, follow-on funding, exit and contribution default. An intention to invest is not the same as a committed source.

Financing red flags

A model with no bridge to history; no minimum cash; debt capacity based on unrealised synergies; missing required CAPEX; seller finance subordinated without senior agreement; unavailable equity; drawdown conditions incompatible with closing; or unconfirmed FX/correspondent-banking routes.

This resource explains; it is neither legal, tax or financial advice nor a formal valuation. Have your situation validated by a professional.