A manufacturer doing $2M a year finances the purchase of a smaller competitor in four layers, and the buyer's own revenue qualifies the structure, not the seller's books. The target's machines go on equipment financing, sized to the iron. The balance of the price goes on an acquisition term loan sized to the buyer's trailing deposits, up to 10 years. The seller carries a note for a slice. And the first 90 days of integration (payroll for the acquired crew, re-papering vendors, moving work between floors) goes on working capital, roughly 10 to 15 percent of the buyer's annual gross, so $200K to $300K at $2M. Together the layers cover both the purchase price and the integration, in days to weeks, where a bank-guaranteed program would take 60 to 90 days and a seller with a second buyer at the table won't wait.
Here's what it looks like at this size. A machine shop doing $2M buys a competitor doing $900K, priced at $650K, with $100K of integration cost behind it. The structure that funds the $750K: $300K of equipment financing on the competitor's CNC machines, a $200K acquisition term loan on the buyer's deposits, a $150K seller note over three years, and $100K of working capital for the 90 days it takes to run two shops as one. The competitor's customer list moves over the week of closing. The buyer's revenue-based capacity ($200K term plus $100K working capital, 15 percent of $2M) is used in full and nothing else is leaned on, because the machines carry their own layer and the seller carries his.
the purchase price, and what the file actually funds once the 90 days of integration are in it, on four layers that each go to the lender that prices them
— Representative structure: $2M buyer, $900K-revenue target; equipment $300K + term loan $200K + seller note $150K + working capital $100K
The Four Layers, and What Each One Is Sized To
Equipment financing on the target's machines. The competitor's CNCs, presses, and trucks are collateral, so this layer is sized to what the equipment is worth, not to anyone's revenue. On most small manufacturing acquisitions it's the largest layer, and it's the reason a $2M buyer can take on a deal the buyer's deposits alone wouldn't carry. Equipment financing is the product page.
An acquisition term loan on your deposits. This covers the goodwill, the customer list, the part of the price the machines don't secure. It's underwritten on four months of your business bank statements and your purchase agreement, up to 10 years. The seller's books set the price; they don't set the approval. Business acquisition loans explains how the acquirer's revenue qualifies the transaction.
A seller note. The seller carries a piece, paid over two to five years out of the business he just sold you. It closes the gap between what the lenders write and the price, and it keeps the seller interested in the handoff going well. Nearly every acquisition at this size has one.
Working capital for the integration. The acquired crew's first three payrolls, vendor accounts re-opened in your name, the slow month while two schedules become one. This is the layer buyers forget, and it's the one that decides whether the acquisition is accretive in quarter one or a cash drain for a year. Working capital funds in days, sized to the deposits.
Bottom line:
Price goes on the machines and the term loan. The gap goes on the seller. The integration goes on working capital. Four lenders, one application, and the buyer's $2M of revenue qualifies all of it.
What Qualifies a $2M Buyer
Twenty-four months operating as the acquirer. Four months of business bank statements with consistent deposits and no overdraft pattern. A signed purchase agreement or a letter of intent with the price in it. A list of the target's equipment with year, make, model, and hours. Credit in the 600s is workable when the deposits are clean; the machines and the seller note do more work than the score.
What it buys you: the seller gets a buyer who can close in weeks. That's the whole advantage at this size. The competitor with a bank-guaranteed program and a 90-day timeline is the one who loses the deal to the buyer who showed up with a structure.
What the Seller Is Actually Choosing Between
Two buyers, same price. One needs 90 days and a committee. One can fund in three weeks because the machines, the term loan, and the working capital each already have a lender. Sellers take the second buyer, and they'll often take a slightly lower price to do it.
What Happens After the Integration
The structure that closes the deal is underwritten on a $2M company. Four months later, the combined bank statements are showing $2.9M, and the lenders are looking at a different business. The working-capital line gets resized to the new deposits, roughly 10 to 15 percent of $2.9M instead of $2M, so the capacity you used up at closing comes back as the two shops become one. After 6 to 12 months of on-time payments, the term loan and the equipment layer qualify for a rate review, and often a consolidation into a single note on the combined company's numbers. You don't buy the competitor on the terms the combined company would get. You buy it on the terms that close in three weeks, run the integration, and then get re-priced on what you built.
See how the acquisition stacks, layer by layer.
Start Your Funding Request →The Same Structure, Bigger
The layers don't change with size; the amounts do. A regional manufacturer buying a competitor with three plants, $12M combined, funded $8.2M in 22 days with a second buyer at the table: $3.8M of owner-occupied real estate on the three facilities, $1.4M on the acquirer's receivables, a $1.2M acquisition term loan, $1.2M of equipment financing across the plants, and $600K of working capital to run three floors as one. Five layers instead of four, because there was real estate in the deal. One quarter later it was operating as one company.
| Layer | $2M buyer, $650K target | $12M combined, three plants |
|---|---|---|
| Equipment financing (on the target's machines) | $300K | $1.2M |
| Acquisition term loan (on the buyer's deposits) | $200K | $1.2M |
| Seller note | $150K | — |
| Working capital (integration) | $100K | $600K |
| Owner-occupied real estate | — | $3.8M |
| A/R facility | — | $1.4M |
| Funded | $750K | $8.2M, 22 days |
The consolidation that often follows an acquisition funds the same way. An Indianapolis manufacturer running three leased spaces bought one 40,000-square-foot building and put all three under one roof on a $1.2M owner-occupied loan, closed in 30 days. The manufacturing hub has the full set of structures, and capital stacking explains the principle behind all of them. Operators in Texas and Colorado send us the $2M version every month.
Regional manufacturer acquiring a three-plant competitor
Owner-occupied CRE + A/R facility + acquisition term loan + equipment financing + working capital
$8.2M
Three plants integrated in 22 days with a competing buyer at the table; operating as one company within a quarter
See the full case →What Kills the Deal
Trying to put the whole price on one loan sized to your revenue. At $2M, your revenue-based capacity is $200K to $300K; if the price is $650K and the machines aren't carrying their own layer, the file is dead on arrival. Skipping the integration money, so the acquisition closes and the first payroll for the new crew comes out of the operating account. Or waiting on the 90-day program while the seller takes the other offer. Buyers who close are the ones who split the price into the pieces each lender writes, before they ask anyone for money.
Fund the acquisition on your revenue
One application, one soft pull. The machines, the term loan, the seller, and the integration each get the lender that prices them.
Frequently Asked Questions
How does a $2M manufacturer finance buying a smaller competitor?
In four layers: equipment financing on the target's machines, an acquisition term loan on the buyer's own bank deposits, a seller note for the gap, and working capital for the first 90 days of integration. The buyer's revenue qualifies the structure; the seller's books only set the price. Funded in days to weeks.
Whose revenue qualifies the acquisition loan, mine or the target's?
Yours. The term loan and working capital are sized to the acquirer's trailing deposits, and the equipment layer is sized to the machines. The target's financials set the price, not the approval.
How much can a $2M-revenue company borrow to buy a competitor?
Revenue-based capacity runs roughly 10 to 15 percent of annual gross, so $200K to $300K at $2M across the term loan and working capital. The equipment layer sits on top of that because it's secured by the machines, and the seller note covers the rest. A $650K purchase with $100K of integration is a normal file at this size.
What covers integration costs after an acquisition?
A working-capital layer in the same application, sized to the buyer's deposits and funded in days. It carries the acquired crew's first payrolls, vendor accounts moved into your name, and the slow month while two operations become one. Leaving it out is the most common reason a good acquisition drains cash for a year.
How fast can a competitor acquisition fund compared to an SBA loan?
Days to weeks. The $8.2M three-plant acquisition above funded in 22 days with a competing buyer at the table. A bank-guaranteed program typically runs 60 to 90 days, which is often longer than the seller will hold the deal.
Do I need a seller note to buy a competitor?
Not always, but at the $500K to $1.5M size almost every deal has one. It closes the gap between what the lenders write and the price, usually paid over two to five years, and it keeps the seller invested in a clean handoff.
Do the loan terms improve after the acquisition closes?
Usually. The working-capital line is resized once four months of combined deposits show the new revenue, and after 6 to 12 months of on-time payments the term and equipment layers are eligible for a rate review or consolidation on the combined company's numbers. Fund on what closes; re-price on what you built.
Bobby's Take
The $2M manufacturer who wants to buy the shop across town almost always starts by asking how much he can borrow, and the number he gets back from his bank makes the deal look impossible. It isn't. The machines were never going to be financed on his revenue; they finance on the machines. The seller was always going to carry a piece. What's left is a term loan his deposits already support and a working-capital line for the ninety days that decide whether the acquisition works. Split the price before you ask for it. The buyers who get these done aren't the ones with the most cash. They're the ones who showed the seller a structure before the other guy showed him a timeline.
