Eventually, every family business must address how to manage succession, and in particular, how to finance the transfer of control to the next generation. Clearly, this is what may be called a “high class” problem, but it is still an issue and can be complex. Despite employing the best estate planning and gifting strategies, it is still not unusual for most of the current wealth to be held by the older generation, which makes a “buy-out” by younger ones complex at best.
Unless one is prepared to surrender substantial wealth to the government, gift taxes complicate the process even further. Of course no one wants to discuss longevity, but parents and grandparents often wish to effect a transfer long before the grim reaper obliges them to do so. And even then, estate taxes can complicate matters further, often making a generational transition impossible.
New York Private Finance can make a difficult situation much less so, by lending money to the next generation buyers to facilitate a transaction that might otherwise be impractical or perhaps imprudent. We can add the equity they are acquiring from older family members to that which they already own and use both as collateral for a larger loan than the next gen buyers might otherwise be able to support. We still seek some diversification in the collateral pool, but the fact that the buyers are adding to a significant asset (which is probably the primary collateral asset) renders the underwriting process more straightforward and flexible. We can even work with families to address issues such as operating control by separating economic interests from those related to governance. New York Private Finance helps families navigate the complexities of family business succession financing with structured, collateral-backed loans. In the end, we understand that legacy is often as important as wealth, and, with creative structuring, we can enable multi-generational businesses to protect both.
Please contact us to learn more.
