Alternative Financing Sources for Business Acquisitions: Crowdfunding, Revenue-Based Financing & More

Traditional bank financing is no longer the only way to manage a business acquisition. Especially in times of low interest rates and restrictive lending, innovative financing models are opening new doors for ambitious buyers. At viaductus, we observe how the financing landscape for business takeovers is fundamentally changing.

In this article, we present the most promising alternative financing sources for your business acquisition and explain when each solution is best suited.

Why Alternative Financing Is Becoming Increasingly Important

Traditional loan financing often reaches its limits in business acquisitions. Banks require high equity ratios, extensive collateral, and have strict evaluation criteria. Alternative approaches become necessary, especially for career changers without industry experience or in business acquisitions with little equity.

Alternative financing forms offer greater flexibility in repayment terms, less stringent equity requirements, and often faster decision-making processes. Additionally, they enable innovative risk-sharing among all parties involved and provide you access to valuable networks of financing partners.

Crowdfunding for Business Acquisitions

Equity Crowdfunding

With equity crowdfunding, you sell shares of the company you intend to acquire to a large number of small investors. This method is particularly suitable for acquisitions with a strong story and clear growth potential.

The major advantage is that you do not assume personal liability as with loans. At the same time, a marketing effect arises through the public campaign, and you build a community of supporters. The market essentially validates your business idea through investment willingness.

However, equity crowdfunding also comes with challenges. The legal structure is complex, the campaign process time-consuming, and you commit to transparency obligations toward many investors. Moreover, this type of financing results in dilution of your own shares.

In Germany, platforms such as Companisto, Seedmatch, and Kapilendo have established themselves as successful providers.

Reward-Based Crowdfunding

Here, buyers offer products or services of the company to be acquired in return for financing. This variant works particularly well for craft businesses or companies with tangible products, as potential customers can directly benefit from the financing.

Revenue-Based Financing (RBF)

Revenue-Based Financing is one of the most exciting developments in alternative financing. In this model, you receive capital in exchange for a fixed percentage of your future revenues.

How It Works and Advantages

You receive financing and repay it through a predetermined percentage of your monthly revenues. Typically, this ranges between 2 and 10 percent. Repayment is completely flexible depending on business performance: you pay less in weaker months and more in stronger months.

A practical example illustrates the model: with a financing amount of €200,000 and a repayment rate of 5 percent of monthly revenues, with a total repayment of €240,000, you would repay €2,500 at €50,000 monthly revenue, but only €1,500 at €30,000 revenue.

RBF is ideal for companies with predictable, recurring revenues, online businesses, SaaS models, and service companies with stable customer bases. In Germany, providers such as re:cap, Uncapped, and Gilion offer corresponding solutions.

This financing form perfectly complements existing financing options for buyers and can be excellently combined with seller financing.

Peer-to-Peer (P2P) Loans

P2P platforms connect borrowers directly with private or institutional investors without traditional banks as intermediaries. This often leads to lower interest rates, faster credit decisions, and more flexible terms with less bureaucratic effort.

auxmoney has established itself as the largest German P2P platform and also offers business loans. Funding Circle specializes in corporate financing, while Kapilendo focuses on medium-sized companies.

Typical loan amounts range between €1,000 and €500,000 with terms from 12 to 84 months. Interest rates vary depending on creditworthiness between 3 and 15 percent.

Asset-Based Financing

In this financing form, the assets of the company to be acquired serve as collateral for the financing.

Factoring and Invoice Financing

Factoring is particularly suitable for companies with high receivables. Outstanding invoices are sold or pledged to generate liquidity for the business acquisition. This method works well when acquiring companies with high receivables, to bridge until full due diligence is completed, or combined with bridge financing.

Asset-Based Lending

Machinery, real estate, or other assets of the target company are pledged as loan collateral. This variant is especially relevant for craft businesses or manufacturing companies with valuable equipment.

Search Fund Model

Originating from the USA, the Search Fund model is gaining popularity in Germany. Investors finance both the search phase for suitable companies and the subsequent acquisition.

The process is divided into three phases: initially, investors finance 18 to 24 months of salary for the intensive company search. Upon successful identification of a suitable target, the acquisition is jointly financed. In the operational phase, the Search Fund manager becomes CEO with corresponding equity participation.

The advantages are manifold: you receive professional investor support, access to experienced mentors, and bear reduced personal risk during a structured search process. More details can be found in our comprehensive article on Search Funds in Germany.

Tokenization and Blockchain Financing

One of the newest developments is the tokenization of company shares via blockchain technology. Security tokens offer a regulated form of digital equity financing with legally regulated digital securities that can be traded on specialized platforms.

Advantages include lower minimum investments compared to traditional equity and increased liquidity for investors. German providers such as Neufund, Bitbond, and the Fundament Group are developing corresponding solutions.

Family, Friends, and Fans (3F Financing)

Financing through your personal network remains an important pillar of alternative financing, especially as a substitute for equity. However, instead of informal loans, you should rely on professional structures.

Participation rights for family and friends, subordinated loans with fair conditions, or equity structures via family offices create clarity and fairness for all parties involved. More on this in our article about Family and Friends Financing.

Strategic Partnerships and Joint Ventures

Instead of a full acquisition, you can enter strategic partnerships that gradually lead to a takeover. These significantly reduce the initial investment, enable risk-sharing with experienced partners, and provide access to sales channels and expertise with the option of a later full acquisition.

Structuring options include management buy-in with a strategic partner, earn-out agreements over several years, or combinations with silent partnerships.

Combined Financing Strategies

The greatest flexibility is achieved through intelligent combinations of various financing sources. For a SaaS acquisition priced at €500,000, financing could consist of €100,000 equity, €150,000 revenue-based financing, €150,000 seller loan, and €100,000 bank loan.

For a craft business with a purchase price of €300,000, a mix of €60,000 equity, €90,000 asset-based lending, €90,000 P2P loan, and €60,000 family & friends financing would be conceivable.

Different financing sources suit different phases of the acquisition process. In the search phase, search funds or personal funds can be used. For due diligence, bridge financing or short-term loans are suitable. At closing, a combination of all sources comes into play, while in the post-acquisition phase, revenue-based financing can support further growth.

Legal and Tax Aspects

Alternative financing forms bring specific legal challenges. Prospectus requirements for public financings, BaFin regulation for certain token models, and data protection in crowdfunding campaigns must be considered. Tax optimization during the sale is also important.

Early involvement of specialized lawyers, comprehensive tax advice on financing structures, compliance checks for innovative models, and careful documentation of all financing agreements are recommended.

Selection Criteria for the Right Financing

Choosing the optimal financing source depends on various factors. Company-specific factors include the industry—IT companies are suitable for RBF, craft businesses for asset-based financing. Cash flow stability determines RBF suitability, while existing assets form the basis for asset-based financing. Growth potential is relevant for equity financing.

Buyer-specific factors include available equity, risk tolerance, industry experience, as well as network and reputation. Market conditions such as current interest rates, availability of bank loans, investor appetite, and regulatory environment also influence the optimal financing choice.

Successful Practical Examples

An experienced manager took over an online shop for €400,000 with mixed financing of €80,000 equity, €200,000 revenue-based financing at 6 percent of revenues, and €120,000 seller financing. Flexible repayment enabled growth investments, and revenue increased by 40 percent in the first year.

In the acquisition of a carpentry business for €250,000, the buyer relied on €50,000 equity, €150,000 asset-based lending secured by machinery, and €50,000 family & friends financing. The low monthly burden due to favorable financing led to rapid amortization.

Avoiding Common Mistakes

Many buyers underestimate the complexity of alternative financing. It requires more effort than traditional bank loans, so you should allow sufficient time for document preparation, due diligence of financing partners, legal structuring, and communication with multiple stakeholders.

Another common mistake is choosing an unsuitable financing form. Not every alternative financing fits every company. A thorough business valuation helps with the right selection.

Often, financing costs are also neglected. Alternative financing can be more expensive than bank loans, so you should consider all costs: interest and premiums, transaction costs, ongoing reporting fees, and dilution effects in equity financing.

Trends and Future Outlook

The landscape of alternative financing is evolving rapidly. AI-based credit decisions enable faster and more precise evaluations. Embedded finance integrates financing directly into business processes, while ESG financing with sustainability criteria is gaining importance. Cross-border financing is making international financing sources increasingly accessible.

Regulatory developments include EU-wide harmonization of crowdfunding rules, clarifications on token regulation, and increased transparency requirements.

Practical Approach

Developing a successful financing strategy begins with calculating the company value, determining the financing need, identifying suitable financing sources, and conducting a comprehensive risk assessment.

Prepare the necessary documentation: a detailed business plan for the target company, realistic financial forecasts, due diligence documentation, and legal structuring proposals.

When approaching financing partners, create a professional presentation, pursue multiple options in parallel, systematically compare terms, and negotiate skillfully.

The closing includes legal documentation, coordination of the closing process, establishment of reporting structures, and maintenance of long-term relationships with all financing partners.

Conclusion: Alternative Financing as a Gamechanger

Alternative financing sources open up entirely new possibilities for business acquisitions. They can meaningfully complement or even fully replace traditional bank loans and enable acquisitions that would otherwise be unaffordable.

The key to success lies in the intelligent combination of various financing sources, perfectly tailored to your specific situation and the target company. With the right strategy, you can make the leap to a successful business takeover even without significant equity.

Would you like to learn more about financing options? Then take a look at our comprehensive articles on financing options for buyers or contact us directly for personalized advice.

The future of business financing is diverse—use this diversity for your success.