How to Finance a Business Acquisition in Switzerland

Financing is one of the most critical — and complex — aspects of buying a business. In Switzerland, acquirers have access to a well-developed financial ecosystem, but understanding the options and structuring the right mix is essential for a successful deal. Here is an overview of the most common financing methods available to buyers in the Swiss market.

Bank Financing

Swiss banks — including UBS, Credit Suisse (now part of UBS), cantonal banks, and Raiffeisen — regularly finance business acquisitions. Banks typically lend 50-70% of the acquisition price, secured against the target company's assets and cash flows. Expect to provide 3-5 years of audited financials, a detailed business plan, and personal guarantees. Interest rates for acquisition loans in Switzerland are competitive, often based on SARON plus a margin of 1.5-3.5% depending on risk profile.

Seller Financing and Vendor Loans

Seller financing is extremely common in Swiss SME transactions. The seller agrees to defer a portion of the purchase price (typically 20-40%) as a subordinated loan, repaid over 2-5 years. This aligns the seller's interests with the buyer's success and signals confidence in the business. Vendor loans often come at favorable interest rates and can bridge the gap between bank financing and total purchase price.

Earnout Structures

An earnout ties part of the purchase price to the business's future performance. This is especially useful when buyer and seller disagree on valuation. For example, 70% might be paid at closing with 30% contingent on the business maintaining revenue targets over the next two years. Earnouts reduce upfront capital requirements and share risk between parties.

Swiss Guarantee Programs (Burgschaftsgenossenschaften)

Switzerland's four recognized guarantee cooperatives — BG Mitte, BG Ost, Cautionneement romand, and SAFFA — can guarantee up to CHF 1 million in bank loans for SME acquisitions. These are backed by the Swiss federal government and function similarly to SBA loans in the United States. The guarantee significantly reduces the bank's risk, enabling financing for buyers who might not qualify on their own balance sheet alone.

Private Equity and Search Funds

For larger acquisitions (CHF 5M+), private equity firms and search funds are active in the Swiss market. Search funds — where an individual raises capital from investors to find and acquire a single company — have grown significantly in Switzerland. PE firms typically seek controlling stakes and bring operational expertise alongside capital.

Mezzanine Financing

Mezzanine debt sits between senior bank debt and equity in the capital structure. It carries higher interest rates (8-15%) but does not dilute equity. Mezzanine financing can fill the gap when bank financing and personal equity are not sufficient. It is typically unsecured and subordinated to bank debt.

Personal Equity Requirements

Most Swiss acquisition financings require the buyer to contribute 30-50% of the purchase price as personal equity. This demonstrates commitment and skin in the game. Sources of personal equity include savings, retirement funds (under certain conditions, pillar 2 and pillar 3a can be accessed for self-employment), and co-investors.

Tax-Efficient Structures

Many Swiss acquisitions are structured through a holding company to benefit from Switzerland's participation exemption on dividends and capital gains. The acquisition debt is placed at the holding level, and interest payments can be offset against dividend income from the target — creating a tax-efficient structure. Consult a Swiss tax advisor to optimize your specific situation.