Your Guide to Business Acquisition Loans

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Your Guide to Business Acquisition Loans
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Business acquisition loans The basics
Most business acquisition loans are term loans.
You receive a lump sum of cash to buy a business
and pay it back, with interest, over a defined
period. The amount of funding you qualify for,
interest rates, and repayment terms vary based on
the borrower's creditworthiness and the type of
lender. Lenders also typically rely on a
business valuation which is a professional
evaluation of the the value of the company you
want to buy along with other factors to figure
out how much they will lend you.
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Lenders will not fund an entire business
acquisition. They will only loan you a percentage
of the purchase price. You will have to put up a
part of the cost of the business as a down
payment. Down payments on business acquisition
loans typically range from 10 to 30 percent
depending on the type of financing, lender, the
company youre buying, and your credit
score. Cash from a term loan can be used to
cover working capital and other requirements for
purchasing and running a business.
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Business acquisition loan options and providers
Several types of lenders offer business
acquisition loans.
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Banks and credit unions
Banks and credit unions offer acquisition loans
with relatively low-interest rates and favorable
loan terms. Loan applicants must have good credit
scores (typically over 700) to qualify for
financing from traditional financial
institutions. They also usually require that
borrowers buying companies have significant
business experience. Be aware that the loan
application and approval process with most banks
and credit unions can take a long time. If you
need fast financing to buy a business,
traditional lenders are probably unsuitable.
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U.S. Small Business Administration approved
lenders
SBA loans, including the popular SBA 7(a) loan
program, are offered by lenders affiliated with
the Small Business Administration. The SBA
partially guarantees them. These loans have
flexible terms, low-interest rates, and most
types can be used for business acquisition. Much
like loans from a traditional lender, SBA loans
have strict requirements, and it can take a month
or more to get funding.
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Alternative business acquisition financing
options
If youre buying a business, you may have funding
options beyond term loans, including

• Equipment financing. If your business requires
  purchasing equipment, you might use an equipment
  loan to finance it. It is usually easy to qualify
  for an equipment loan because the equipment is
  the collateral used to back it. Be aware that if
  you fail to make your loan payments on time, you
  could lose the equipment you depend on to run
  your business.

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• Business line of credit. A business line of
  credit works like a credit line youd have on
  your home. You have access to funding when you
  need it, and you only have to pay it back when
  you borrow funds. While this option isnt
  suitable for funding an entire business
  acquisition, it can help cover unexpected
  expenses once you start operating the business.

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Why Choose Biz2Credit?

• Trusted partner for franchise funding
• Biz2Credit was founded in 2007 and has provided
  more than 10 billion in loans.
• Dedicated support team
• Tailored financing solutions

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