Knowledge base · Factoring · 5 min leestijd · 2 Sep 2026
Financing an acquisition: where working capital fits
In an acquisition the attention goes to the purchase price. How it gets paid, and with which stack of finance, comes later. Working capital then often stays out of sight, even though it is already present in the business being transferred.
The stack in an acquisition
In an acquisition it is rarely one financier facing the purchase price. A bank usually asks for co-funding, so that the risk is spread.
That stack often consists of a bank loan and the buyer's own contribution. A subordinated loan from the seller is regularly added to it.
A seller's loan like that sends the other financiers a signal. The seller keeps carrying risk in the business being sold.
Other forms are an earn-out, a profit right and a gradual transfer of the shares.
Where the working capital sits
The business you are taking over has a receivables book and usually a stock. That is money already inside the business.
As long as those assets only sit on the balance sheet, you are paying for them in the purchase price. Turn them into cash headroom and that lowers the external funding need.
That is exactly what factoring and inventory finance do.
Why the pledge is the first subject here
In an acquisition the security changes hands as well. The receivables and stock of the target company are often already pledged to its bank.
Without that pledge being sorted out, a working capital structure never gets off the ground. SOOF Finance takes over an existing pledge and coordinates that process with the bank.
For many SME acquisitions that is the point at which the structure comes together after all. How pledging works is set out in what is a pledge.
What this means for a management buy-out
In a management buy-out the buyers' own contribution is usually limited. The management knows the business, but rarely has the purchase price in the bank.
Financing on the existing receivables and stock narrows that gap. The finance then sits in the business, not in the buyer's private position.
When this is relevant to you
SOOF Finance works with SMEs.
An acquisition with a receivables book below that threshold falls outside this route. In any doubt? Take the quickscan or get in touch.
About the author
Jaap van Aalst
Commercieel directeur, SOOF Finance
Jaap van Aalst started his first business almost thirty years ago, in staffing and secondment. That is where he saw for himself how many opportunities are lost when money sits too long in unpaid invoices.
Around eighteen years ago he moved into the factoring world, as commercial director. Since then he has sat across the table from countless business owners and seen at first hand what financing questions look like in practice. He looks further than the balance sheet: what the business does, where the opportunities are, and which form of finance genuinely moves it forward.
That is also the basis of his work at SOOF Finance. His starting point is simple: finance is not an end in itself, but a means by which a good entrepreneur delivers on their plans.
Frequently asked questions
No. Factoring funds the receivables book of the business. That lowers the external need and does not replace purchase price funding.
That takes agreement with the target company's bank about the existing pledge. Discuss this early in the process.
That depends on who has control over the receivables book after the transaction.
Further reading: the biggest pitfalls in factoring
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