If you are looking into purchasing a business, you can easily apply for business acquisition loans through Lendio. Buying and owning an existing small business is no walk in the park, but it is certainly rewarding to watch it grow and expand into what you’ve always wanted it to be. Which, is why your dream should never be cut short because you don’t have the funds to finance it before it has the chance to be successful. Small businesses are the bread and butter of America’s economy. Standing strong at 30.7 million and accounting for 99.9% of all U.S. businesses.
When you’re ready to buy an existing business or franchise, Lendio’s business acquisition loans are the place to start. They’re tailored to help you skip the startup routine and begin benefiting from an already established business. You find the right acquisition, and we’ll get you covered with the most competitive financing loan to buy a business.
Here’s what you need to know about business acquisition loans and how you can apply to one using Lendio.
What Are Business Acquisition Loans?
Business acquisition loans are loans created explicitly to finance the purchase of an already established business or franchise. There’s no one-size-fits-all solution for every person buying an existing business. Options vary by your specific needs, benefits, amount, interest, qualifications, and other special offers by a lending business.
Loan terms can be revolving or range from 10 to 25 years long. Depending on your needs, your business acquisition loan’s length can be knocked out in a decade or expand into two decades or more for lower payments and more paid interest.
Benefits of Business Acquisition Loans
Getting a business acquisition loan will allow you to expand your business faster or buy a business when you don’t have the capital to support the venture.
One of the key benefits of business acquisition loans is that collateral is not required for approval. If you have good credit, you can get the loan with low interest, saving some money in the process. It can also be expanded into longer repayment terms to provide lower monthly payments to improve your business’s cash flow.
On the other hand, it isn’t always easy to qualify, some companies expect a down payment, and lenders don’t always offer the full amount you need to make the purchase. Fortunately, you can combine other financial options with a business acquisition loan to support your funding.
What You Need to Consider Before Applying
A business acquisition loan allows you to fund your expansion or other business ventures. However, you must understand what you’re getting into before buying a business to set you up for success. For instance, thoroughly vetting the company that you plan to buy will significantly reduce the acquisition risks. Therefore, ensure it is worth what you’re buying it for before making the purchase.
Having a clear understanding of the business’s valuation and other information can also help you meet with a lender to assess if you qualify for a business purchase loan. They’ll want to see the proof in documents such as business evaluations, profit and loss statements, and the business’s bank statements.
How Do You Finance a Business Acquisition?
There are many options to consider when you’re deciding how you’ll finance a business acquisition. A business acquisition loan is an obvious choice in many cases, but you can combine it with additional finance options to lighten the load on how much you’ll payback. Beware, however, that loans that don’t require down payments don’t come free.
In certain circumstances, you may not want to pay a down payment. In this case, you’ll still be expected to offer up some form of collateral like real estate, undeveloped land, inventory, and more. This ensures you’re fully committed to paying back your loan, reducing the lender’s risk while doing business with you.
Other financing options can include (but aren’t limited to):
- Your Funds: Using your own funds (savings, retirement, home equity, etc.) is an option. However, it’s an uncommon one to use exclusively. An established business can get pricey, so it’s not always feasible to throw in all (or most) of your funds, especially since there are additional costs after the sale. However, many buyers combine their funds with a business acquisition loan to ease the pressure on their own finances.
- Leveraged Buyout (LBO): This strategy is common for transferring private property (like small business ownership), paying off funds with debts, often using the acquired business’s assets for collateral, along with the acquiring company’s assets.
- Issuing Bonds: Although it’s more complicated, this strategy can be used when financing an acquisition. It functions as a loan between you and an investor that requires periodic interest payments to the investor until the maturity date when you’re expected to pay it back in full.
Using Lendio, you can also get help with other types of business loans since they also have lenders in their network that can provide the following business loans:
- SBA Loans
- Business Lines of Credit
- Short-term Loans
- Merchant Cash Advances
- Term Loans
- Equipment Financing
- Commercial Mortgages
- Accounts Receivable Financing
- Start-up Business Loans
How Much Money Can You Borrow to Buy a Business?
It can be challenging to get your hands on a loan when the company’s financial history isn’t strong and doesn’t have a proven track record, despite your capabilities to turn a business around. While acquiring a thriving small business would be more advantageous and easier to obtain financing, it isn’t always the case.
The U.S. Chamber of Commerce explains, “Any red flags from before the acquisition can prevent them from attaining a loan. That, coupled with any personal finance issues, makes it especially difficult to receive the proper funding.” Fortunately, buying an existing business isn’t entirely out of the question. For example, a reasonable down payment between 20% and 50% should secure the loan.
However, all things aside, how much money you can borrow to buy a business depends on the lender. Through Lendio, loan amounts can range from as low as $5,000 to as high as $5,000,000 since you will be applying once to multiple lenders. You can also keep costs down with interest rates as low as 5.5% if you qualify.
How Do You Qualify for a Business Purchase Loan?
You’ve found your acquisition. Now it’s time to see if you qualify for the financial help of a business purchase loan. For most small business loans, lenders only require your credit history, time in business, and revenue to consider your qualifications for a loan.
However, when reviewing your qualification for buying an existing business, a lender will pay special attention to records of the business’s financial performance and valuation: your business plan, financial projections, and related experience that will help you successfully manage and grow the business. This is because they need assurance that the company you plan to invest in is viable enough to make sure they’re going to get their money back.
How to Get a Business Acquisition Loan with Lendio?
Getting a business acquisition loan with Lendio will allow you to choose from different lenders when deciding which one is the best fit for you and your venture plans.
The process starts with filling out a quick 15-minute online application covering your basic info, owner info, business info, and documents. Making it easy for you, you can upload your documents online; for example, your can quickly transfer your business account bank statements over with a link to your bank account. Additional information you will have to provide includes your credit score, average monthly revenue, business industry, and your loan’s purpose.
After your application is complete, you will be paired with a personal funding manager who will forward your application to the 75+ lenders in Lendio’s nationwide network and help you determine the best choice for you. Once approved, the fund to purchase your business will be available to you in as soon as 30 days.