Acquisition of a company with an existing bank loan

Question

Q: I'm planning to acquire a running business but the existing owner has some bank loan on the company name. What should I do… A: You have two options going ahead, either you wait for the owner to clear out the loan or enter into an agreement with the owner with assigning the loan debt to the owner…

Hari Wadhwana · Accepted Answer

Dear Sir/ Madam,

Thank you for getting in touch with me on this.

Please note that before acquiring the business, you will have to enter into an appropriate agreement with the existing owner to ensure he takes care of the existing bank loans.

However, when and if the bank calls upon the loan, it will do so against the company (making you answerable). You can, in turn, sue the existing owner to pay the loan.

There will be a chain of litigation i.e. Bank to Company to Existing Owner.

You have two options going ahead, either you wait for the owner to clear out the loan or enter into an agreement with the owner with assigning the loan debt to the owner.

If you want any assistance regarding the agreement or have further queries then you can contact me on hari.wadhwana@gmail.com or 052-9495731.

Regards,

Hari Wadhwana

Questions & Answers