Did you know you could get a small business loan to acquire an existing business? Many entrepreneurs choose a business acquisition loan to jump-start their small business journey or expand an existing business by acquiring another.
Buying a business can be incredibly rewarding and lucrative, but obtaining business acquisition financing can be difficult without an established business or a track record of success in a similar industry.
Fortunately, there are alternatives to traditional business loans that can help entrepreneurs take the next step toward business ownership and growth.
Loans for business acquisition are available from a variety of sources, each with flexible payment terms and rates. It is often easier to get a loan to buy a business if you already own an existing business in a similar industry. However, there are also small business acquisition loans available for startups.
Loans to acquire a small business vary in amounts, terms and interest rates. Each of these variables will impact the other.
A conventional term loan from a bank for business acquisition is one of the most popular ways to acquire a business. Substantial assets, good personal credit and demonstrated success in business are among the requirements for getting a traditional small business loan.
Small Business Administration (SBA) loans are also a good option for entrepreneurs looking to acquire a small business. Because they are government guaranteed, SBA loans are perfect for small business owners who may not qualify for a traditional bank loan. Connect2Capital can help match you with an SBA lender that makes small business loans for business acquisition.
Learn more about other types of small business loans for business acquisition.
Like most small business loans, your credit history is an important qualifying factor. If you’re buying a business or a franchise, lenders want to ensure you’re investing in a viable enterprise.
When acquiring an existing business, small business lenders will need to see records of the business’s financial performance, valuation and projections. Your related experience in owning and operating a similar business will help lenders see that you can successfully manage and grow the business you’re acquiring.
Many entrepreneurs use loans to acquire a small business in an industry where they are already operating. A business acquisition loan can also be used to buy out partner(s) in a business you already own.
Business acquisition loans can also be used to finance a franchise purchase, particularly a well-established brand with many locations and a history of successful performance.
Business acquisition loans usually come with closing costs, which vary based on business size and type. Remember to budget for closing costs when determining your ability to repay the loan.
On Connect2Capital, you can quickly know in five minutes if you are eligible for small business financing through one of our lending partners.