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Financing a company takeover

This information is provided by:Netherlands Chamber of Commerce Financing Desk, KVKNetherlands Chamber of Commerce Financing Desk, KVKNederlandse versie

Financing a company takeover is an important issue. There are several options and takeover constructions to consider.

Do you need financing for the company takeover?

When taking over a company, you can consider financing options like a bank loan, microcredit, investors, crowdfunding, or your own capital. You can also look into additional financing options, such as a financing mix. For example: the bank provides a loan, the buyer invests part of their own capital, and the selling party provides the rest of the capital in the shape of a subordinated loan.

What is a subordinated loan?

A subordinated loan is a loan from the seller to the buyer. If the selling party is willing to lend you part of the money you need, it may make the difference between being able to take over the company or not being able to do so; in that way, the seller may benefit from this construction too. There are also tax options that can make a takeover easier, financially speaking, for both buyer and seller. There are several financing options for this gradual type of company takeover.

Other takeover options

If you have worked in a company for at least 3 years as a co-entrepreneur or employee, you and the seller can agree to make use of the so-called ‘doorschuiffaciliteit’, in effect a silent transfer of the company (this is an option solely for non-legal entities, so sole proprietor or a partnership). In this construction, you take over the company for the fiscal book value. This is often a lower amount than the real value. The advantage for the seller is that they will not have to pay as much when settling with the Tax Administration. For you, it means you will need less money to finance the acquisition. Be aware that this also means that if you end or sell the company, you will have to deal with the tax settlement over the added value. You are taking over a future tax obligation. Take this into account when negotiating the takeover terms. The company can also be gifted, for instance to a family member as an inheritance. In this case, you will usually have to settle (at least partly) with the Tax Administration.

Expert advice

Some types of takeover involve going in for a longstanding financial relationship with the seller. These options are meant to make the takeover financially viable for the buyer. Buyer and seller can benefit from these solutions. But a long-term financial relationship is also vulnerable: age, emotions, opportunities, and threats can put a lot of pressure on both of you. Make sure you put down all details of your agreement in writing, and get advice from an expert (in Dutch).

KVK Financing Desk

For more information or questions, contact the KVK Financing Desk: 0800 - 10 14.

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