How a Buyer Finances the Acquisition of an SME in French-speaking Switzerland: The Financing Options

When you consider selling your SME in French-speaking Switzerland, one question comes up every time: does your buyer really have the means to acquire your company? Understanding how an acquirer actually finances an acquisition gives you the keys to assess the strength of their case, anticipate the risk of a failed closing and negotiate with peace of mind. In this article, we explain the main financing options used in an SME business transfer in French-speaking Switzerland — from the point of view of the seller who wants to be sure the funds of their future acquirer are real.

Why the buyer's financing concerns you directly

As a seller, you are naturally focused on the sale price. Yet the buyer's financing is just as decisive as the headline figure. An acquirer who offers an attractive price but whose bank financing is not finalised represents a real risk: timelines stretch out, conditions change and, in the most problematic cases, the closing never happens at all.

The key points to watch as a seller:

• Real ability to pay: a buyer must have a concrete, validated financing plan, not merely an intention.
• Certainty of closing: the more fragmented and conditional the financing, the higher the risk of failure.
• Avoiding buyers without means: some acquisition candidates overestimate their borrowing capacity or rely on uncertain sources of funding.

Let us review the different building blocks that make up the financing of an SME acquisition.

The buyer's personal contribution: the first signal of commitment

Every acquisition financing plan starts with the buyer's equity. In French-speaking Switzerland, banks generally require the acquirer to contribute between 10% and 30% of the transaction price from their own funds.

This contribution can come from:

• Personal cash or savings
• Early withdrawal of 2nd pillar pension assets (subject to strict legal conditions)
• Contributions from relatives (family, business partners)
• Sale of property or other personal assets

The higher the personal contribution, the more the buyer demonstrates commitment and reassures lenders. For you as a seller, it is also an indicator of seriousness: an acquirer who does not commit their own funds is rarely a trustworthy partner for the business transfer.

The bank acquisition loan: the backbone of the financing

In most cases, the bank loan makes up the largest share of acquisition financing. Swiss banks (UBS, Raiffeisen, the cantonal banks, PostFinance, etc.) offer acquisition loans specifically designed for the purchase of SMEs.

How Swiss banks assess an application

Banks examine several elements before granting an acquisition loan:

• Leverage ratios: total debt should generally not exceed 3 to 5 times the target company's EBITDA.
• Pledge of shares: the SME's shares or units are often pledged to the bank as collateral.
• Guarantees: the bank may require personal guarantees from the buyer or from third parties.
• The quality of the business plan: the bank analyses the company's ability to repay the debt from its future cash flows.

For you as a seller, obtaining a formal bank approval — and not merely a preliminary indication — is a strong signal that your acquirer's case holds up.

The vendor loan: when the seller takes part in the financing

A vendor loan is an arrangement whereby you, as the seller, agree to defer payment of part of the sale price. In practice, you temporarily "lend" a fraction of the price to your buyer, who repays it over an agreed period — generally 2 to 5 years.

Typical features of a vendor loan in French-speaking Switzerland:

• Often represents 10% to 30% of the total price
• Bears interest (generally 2% to 5% depending on the context)
• Repaid in annual instalments or as a lump sum at maturity
• Often subordinated to the bank debt (the bank is repaid first)

Agreeing to a vendor loan is seen by banks as a positive signal: it shows that you, as the seller, have confidence in the company's long-term prospects after the transfer. It is also a lever for unlocking situations where the bank alone cannot finance the full price.

To explore this topic further, read our dedicated article: Earn-out, vendor loan, cash payment: understanding the payment terms.

The earn-out: additional consideration linked to future performance

An earn-out is a clause under which part of the sale price is conditional on the company's future results after the sale. If the SME reaches certain targets (revenue, EBITDA, number of customers), you receive an additional payment; otherwise, this additional payment is reduced or cancelled.

An earn-out has advantages and drawbacks for the seller:

• Advantage: it makes it possible to value a fast-growing company whose future potential is difficult to quantify today.
• Drawback: you no longer control the management of the company, yet your additional payment depends on it — which can create tension.
• Point to watch: the precise definition of the performance indicators and the length of the calculation period are decisive.

The earn-out is therefore a tool to be handled with care, ideally framed by a lawyer specialising in business law.

Investment funds, family offices and institutional buyers

A particular category of buyers uses an LBO (Leveraged Buy-Out) approach: the acquisition is financed by a mix of equity provided by an investment fund or a family office, and a significant acquisition debt taken on at the level of an acquisition holding company.

Under this structure:

• A holding company is created specifically to acquire your SME.
• The holding company borrows the bank financing and holds the shares of your company.
• Dividends paid up from the SME to the holding company are used to repay the debt.
• The institutional buyer provides the equity and steers the strategy.

This type of buyer — private equity fund, family office, trade buyer — generally has financing already structured and experience of M&A transactions. It is an additional guarantee of seriousness for the seller.

Note: in the case of an MBO (Management Buy-Out), it is the existing management team that takes over the company using a similar structure. To understand this specific route, read our dedicated article: The management buy-out (MBO): how does it work?

Combining the sources: the typical financing structure of an SME acquisition

In practice, most SME acquisitions in French-speaking Switzerland combine several sources of financing. A common structure looks like this:

• Payment at closing: 60% to 80% of the price, financed by the buyer's personal contribution and the bank acquisition loan.
• Vendor loan: 10% to 30% of the price, repaid over 2 to 5 years after closing.
• Possible earn-out: 5% to 15% of the price, conditional on performance over 2 to 3 years.

This structure aligns the interests of the seller and the buyer: you receive a significant share of the price at closing, while indirectly taking part in the success of the transition. The vendor loan and the earn-out create a bridge between the two parties during the transition period.

To understand fully how these terms fit together in a letter of intent, we invite you to read our article: The letter of intent (LOI) in an SME sale: what it commits and what it protects.

What this changes for you as a seller: the advantage of a direct buyer with secured financing

Understanding the financing mechanisms of an acquisition allows you to assess concretely the strength of each candidate acquirer. But beyond the theory, reality on the ground is often more complex: bank processes drag on, conditions change, and some buyers disappear after months of negotiation.

Vendre-Entreprise.ch is a direct buyer that acquires French-speaking Swiss SMEs with its own financing already in place. In concrete terms, this means for you:

• A single point of contact: no intermediary, no investment committee to convince, no third-party bank to satisfy.
• A letter of intent (LOI) within 72 hours: as soon as we receive the essential information about your company, we can provide you with a written, structured offer.
• A fast closing: the absence of external bank approval considerably shortens the time between the LOI and the final signing.
• A reduced risk of failure: the main reason a sale falls through is the buyer's inability to finalise their financing. This risk is eliminated with a direct buyer.

If you would like a quick estimate of your company's value and an understanding of what a sale could bring you, use our Valuation simulator. And if you would rather talk to us directly before making any commitment, take a few minutes to complete our pre-contact form — we will get back to you quickly for an initial confidential conversation.

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Disclaimer: This article is published for information purposes only and does not constitute legal, tax or financial advice. Every business transfer situation is unique. We recommend that you consult a lawyer specialising in business law, a notary or a qualified tax adviser before taking any decision relating to the sale of your SME.