What is a business acquisition loan? Business acquisition loans are a type of financing you may use when purchasing an existing franchise or starting a new business of your own. Business acquisition loans bring many benefits.
A business acquisition loan can help you:
You can also use business acquisition financing to buy out a partner from a business you already own.
There are several types of loans you might pursue when funding a business acquisition. You’ll want to be sure you’re picking a loan that will not only provide the amount of money you need but will also offer reasonable terms of repayment and interest rates for your new business. The amount of money you will receive and the requirements that you will be required to submit will vary with each lender.
An SBA-loan is one of the most common bank loans used by business owners and is aided by the United States Small Business Association. The United States Small Business Association presents a guarantee to a bank, who, in turn, will provide the business owner with a loan.
With an SBA-loan, the bank won’t have to worry about a lot of risk in the case that you, the borrower, may not be able to pay back your debt. As a result of that, with SBA-loans, a bank will typically offer low interest rates and longer terms in order to pay back a debt.
An SBA-loan is considered to be of higher quality and is known to offer appealing terms. It is one of the more affordable options for business owners to pursue. That said, though, the application process is long, and it can take a while to see approval or funding come in.
You can learn more about SBA-loans through the resources that the SBA has posted on its website.
With an SBA-loan, the United States Small Business Association is looking for a business owner who has both respectable personal and business credit, as well as no red flags. If you have qualified for an SBA-loan, you may be able to receive anywhere up to five million dollars.
A Startup-loan is a great choice for business owners that don’t already own a business or want to get a loan for their startup. In order to receive a loan for a startup business, owners will need to make it clear they possess the skills, experience, and resources that are essential to running a business.
An owner may obtain a Startup-loan from a bank, the United States Small Business Association, or a private lender. It’s harder to receive a Startup Loan than it is an SBA-loan as the funds will come from a lender who may be hesitant in providing a large sum of money to someone who is not receiving a lot of revenue or has poor credit history when applying. Lenders will want to see that you have a strong, concrete business plan and a stable credit history.
Although similar to term loans, Startup-loans are easier to qualify for as lenders are lenient with the years of experience you must have prior to submitting an application. With a term loan, you must already have two years of experience in business.
Long Term loans provide a wide range of ways in which you may use funds to support your business. However, these loans will require fixed payments on a monthly basis and higher interest rates. Despite this, as a new business owner, you’re able to practice getting into the rhythm of regular payments. Long Term loans are usually expected to be repaid somewhere within three to ten years. Large amounts of paperwork will be required in order to apply for a long term loan, which can contribute to the longer wait times. Business owners may also need to bring at least two years of experience, a solid credit history, and collateral in order to qualify for a loan. Business owners can receive long term loans from banks and online lenders.
Unlike long term loans, short term loans need to be repaid within three to 18 months and have looser requirements as well as higher interest rates.
Equipment Financing is beneficial as equipment can be a major expense in the acquisition of a new business. With this type of financing, no extra collateral is required. Essentially, your purchase price will be based upon the value of the machinery and the equipment that you will receive. Due to this, interest rates are typically lower, and repayment plans are manageable.
Business acquisition funding can provide you with capital to purchase a business, franchise, or asset. Your company’s assets will be used as collateral. The interest rate is typically lower for this type of funding than other small business funding options.
Before you’re qualified for acquisition funding, the provider will look at:
The SBA 7(a) loan can sometimes be used for acquisition funding. This can be an ideal solution for eligible companies because SBA loans tend to have lower interest rates.
If you are thinking about applying for acquisition funding, you should apply as early as you can. The long wait time can be prohibitive to many types of investments, so it’s best to submit the application sooner rather than later. During the months it will likely take to get a decision from the provider, you may need to investigate alternative funding sources that can get you the money faster.