Purchase Capital

Before you can locate appropriate bank acquisition targets, you need to define how large the ideal target bank should be. This is typically set by the amount of purchase capital your group has to invest in the bank acquisition.  Some key questions to ask include:

  • How much do you want to spend in total? The answer to this question helps you decide the size of a bank, the amount of deposits on hand, and how many bad loans are on the books.
  • Do you want a bank with a sizeable portfolio of bad loans? Bad loans help you during the negotiation process, but they can hurt you after the purchase is final. Be realistic about the potential outcome of the bad loans you acquire, and always remember that they're your responsibility once the deal closes. They may also cost you precious capital to solve the problems.

About the Capital Raise

Where does the money come from? Whether you are buying or starting a bank, you need to raise money to fund your project. This task can be a daunting one. Generally, bank organizers raise capital by locating like-minded individuals to invest in the bank. Those individuals, in turn, tap into their professional and personal networks to locate additional investors. This process continues until the value of pooled funds reaches the goal. When purchasing a bank the capital needs to be raised up front. You must show the regulators that the capital to close is in hand as verified by bank statements.