How to finance the purchase of a DME company


There are many ways to finance the purchase of a DME business. Here is a brief overview of the most common methods.

ALL CASH

A cash transaction is the simplest way to purchase a DME company. Once the legal hurdles are addressed, and the due diligence phase is completed the buyer simply places cash into an escrow account. This money is paid to seller upon completion of the transfer of ownership contracts and other legal requirements. A cash transaction is most common for asset sales.

In addition, cash sales can occur through private equity transactions or other arrangements where the buyer is borrowing the funds to finance the deal.

SELLER FINANCING

A very common way to sell a business is where the buyer pays some percentage of the transaction in cash and the remaining balance is secured with a note against the business. The new owner then makes regular payments to the seller for a set period of time.

PERFORMANCE FINANCING

Often when there is a deal to be made, but there is a question of value the parties will enter into a performance based seller financing. In this arrangement the buyer will pay a portion of the sales price in cash, and a note will be held by the seller. However, the payments made to the seller will be based on the performance of the company.