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The Top 5 Loans to Finance Your Business Acquisition
Looking for the right type of loan to finance your business acquisition? There are a lot of options. Click here to learn a few of the best.
Finance your business acquisition
Here are top 5 loans to learn about
Looking for the right type of loan to finance your business acquisition? There are a lot of options. Read on to learn a few of the best.
Finance your business acquisition
A record $2.5 trillion in mergers was announced in the first half of 2018.
If you are looking to acquire a business, there may not be a better time.
The acquisition gives you access to experts, capital, and market power that can grow your enterprise and build your brand. Yet you may be wondering how you can make it happen.
There are a number of ways to finance your business acquisition. Here are five of the best loan options.
1. Small Business Administration Loans
Small Business Administration (SBA) loans are known for their competitive interest rates and long repayment plans. The SBA does not loan money directly. Instead, they partner with select banks and lenders to secure loans to business owners.
It is easier to get approved for SBA financing if you are an established business rather than a startup. This is because the lender can use your existing repayment history to prove your credibility.
It may take longer to qualify for an SBA loan than other loans. In addition, you will likely be required to provide a down-payment of at least 10%.
Interest rates on SBA loans vary depending upon the current U.S. prime rate. A repayment schedule will vary depending upon the type of business you are purchasing. It is shorter for working capital and longer for real estate.
2. Startup Loans
If you are a new business owner hoping to finance your business acquisition, a startup loan may be best for you.
These loans may be easier for new business owners to qualify for, but you will still need a solid business plan and a good credit history. One downside of startup loans is that they can restrict cash flow. And don't forget that you could be putting your own credit reputation at risk if the business doesn't work out.
3. Rollover for Business Startups
Rollovers for Business Startups (ROBS) allow you to access the money from your retirement to start a business without paying taxes or early withdrawal fees. The funds can be used for acquisition, working capital, or as a down-payment for other forms of financing.
A ROBS is not a loan, so there will be no debt to repay. It is also quicker to acquire than a typical business loan.
A ROBS usually requires a setup fee and a small monthly management fee. The biggest obvious drawback is that you will risk your retirement funds.
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4. Home Equity Line of Credit
A Home Equity Line of Credit (HELOC) is a line of credit secured by the equity you have in your house or apartment. You will likely need at least 20% equity in your home.
A HELOC can be a more inexpensive way to access your credit than other methods because they offer interest-only payments for the first few years of repayment. The downside is that you are risking your home if your investment does not work out.
5. Term Loans
A term loan offers a lump sum that can get repaid in fixed installments for a predetermined period of time. Generally, they are quicker to acquire than an SBA. You may, however, get held personally liable if your business stops making payments.
The Best Way to Finance Your Business Acquisition
The best loans to finance your business acquisition will depend on your experience, credit history, and type of business.
For more information on business acquisition options, read our blog today.
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BUSINESS ACQUISITION
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THE BIZNEXUS ROUNDUP
Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.
The Top 5 Ways to Finance Buying an Existing Business
Are you looking for innovative ways to finance buying an existing business? Read on to learn about some common ways to finance buying an existing business.
Buying a business
Here are five ways to financing your acquisition
Are you looking for innovative ways to finance buying an existing business? Read on to learn more.
Finance buying an existing business
In a lot of ways, running your own business is the ultimate fulfillment of the American dream. You set your own hours, act as your own boss, and get to spend your days doing something you love. But how can you become a business owner without all the risk that comes along with starting something from scratch?
What do you do if you want to finance buying an existing business?
There are a number of ways to approach business financing. From making arrangements with the seller to getting a standard loan, you can choose the option that works best for you. Read on to learn about some common ways to finance buying an existing business.
1. Seller Financing
Depending on who you’re buying your business from, you may be able to get the seller to finance the sale of the business. Like with a loan, you pay an agreed-upon amount every month for a certain period of time until you’ve paid for the business in full. This gives the business owner a guaranteed source of income for the life of the loan, and it allows you to avoid the initial up-front expense of buying them out.
2. Partnership
If your seller won’t finance your purchase but you want to avoid a traditional loan, you may be able to go into business with a partner. Each of you would pay for a portion of the business, and you would run it together. This effectively doubles the amount of capital you have to invest in this business and gives you some help in running it.
3. Sell Stock To Employees
If you plan on having a number of employees, another financing option may be to sell stock to your employees. You’ll have to organize the business as an S-Corp or a C-Corp, and we would recommend selling non-voting stock so you retain ownership. But this option can get you a huge discount – possibly as much as 90 percent – on the business price.
4. Lease The Business
As with many other large purchases, one of your options with buying a business is to lease it. This will require cooperation with your seller since you will take over running the business and pay them a fee each month, while they still retain ownership. But it gives you time to build up capital in the business before you make the big purchase.
5. Get A Loan
And, of course, a very popular option for financing buying a business is getting a loan. You can get a term loan, a Small Business Administration loan, or asset-based financing, depending on your situation. You can also use a combination of the three to get the right solution you need to buy your new business.
Learn How to Finance Buying an Existing Business
Starting a business is challenging enough, but knowing how to finance buying an existing business is a whole different ball game. There are a number of different approaches that will work, depending on your needs. Talk to your seller and your bank and see which option will work best for you.
If you’d like to learn more about entrepreneurship through acquisition, check out the rest of our site at BizNexus. We have tools to help you buy or sell a business or franchise. Check out our posts about buying a business to start planning your entrepreneurial success today.
BizNexus -Learn More From Our YouTube Playlist:
BUSINESS ACQUISITION
Have you checked out our podcast?
THE BIZNEXUS ROUNDUP
Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.
5 Biggest Myths When Taking Out a Business Loan
Business loans are great for people looking to start huge corporations, but what about if you just want to buy a small business? Read on to learn more about some of the biggest myths about taking out a business loan.
5 Biggest Myths
When Taking Out a Business Loan
Are you thinking about taking out a business loan but you're worried you might be misinformed? Read this article to figure out what you need to know.
Taking out a business loan
Do you ever think that you’d like to start a business someday if only you had the money? Business loans are great for people looking to start huge corporations, but what about if you just want to buy a small business?
Loans like that aren’t available to people in your situation, right? Wrong, In fact, there are so many business loan options these days that anyone can find a loan to suit their needs. But there are still a lot of misconceptions about these loans floating around.
Read on to learn more about some of the biggest myths about taking out a business loan.
1. Go Big or Go Home
One of the biggest myths about business loans is that you have to take out a large amount of money. Many banks do prefer larger loans, but there are lots of microloan financing options available. The Small Business Association will even offer loans as small as $500 if you need some cash quickly.
2. Perfection Is Crucial
Having good credit does help improve your chances of getting a loan with good terms. But if your credit history isn’t flawless, you can still get a business loan. Smaller loans, in particular, tend to work well for people working on building a bad credit score back up.
3. It Takes Forever
In the old days, you’d have to spend days or weeks putting together a loan application and another few weeks or months to get the money. But today’s world moves faster, and business loans are no exception. You may be able to complete a loan in as little as an hour and get the money as soon as a few days later.
4. Collateral Is Important
Trying to offer collateral when you’re trying to start or grow a small business can be tricky. The whole idea is that you don’t have a lot of capital, to begin with. But there are some loan options today that don’t require any sort of collateral if you don’t have much you want to offer.
5. You Don’t Have Options
Many small business owners have the idea that when they go in to get a loan, there are fixed terms they’ll have to deal with. But lenders know that not every business is the same, and not every borrower’s needs are the same. They can adjust the terms of their loan to suit your business needs (within reason, of course).
Learn More About Taking out a Business Loan
Taking out a business loan can be a great way to give your business a boost when you need it. And in today’s financial world, you don’t have to settle for huge loans that require perfect credit and a ton of collateral. There are a ton of options open to you, so shop around and find the solution that works best for your business.
If you’d like to get help buying or selling a business, get in touch with us at BizNexus. We are here to help you manage entrepreneurship through acquisition. Explore our financing options for buying a business, and get started on your new venture today.
BizNexus -Learn More From Our YouTube Playlist:
BUSINESS ACQUISITION
Have you checked out our podcast?
THE BIZNEXUS ROUNDUP
Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.
5 Effective Ways for Financing a Business Purchase
Financing a business purchase can be challenging, but there are some options to help you make this purchase. Keep reading to learn what these options are.
Financing a Business Purchase
5 Effective Ways
Financing a business purchase can be challenging, but there are some options to help you make this purchase. Keep reading to learn what these options are.
Financing a business purchase
In the third quarter of 2015, the median sales price for a business sold was $185,000. Most people don't have that much cash on hand.
This means financing a business purchase is the only option. But there are several ways to find finance to buy a business.
Which one you choose often depends on your current financial situation and the type of business you're looking to buy. We want to help you make the right decision on how to make a successful small business acquisition.
Keep reading as we list five effective ways to acquire financing to buy a business.
1. Financing a Business Purchase With a Bank Loan
If you want to buy a business and are thinking of making the purchase with a bank loan, make sure the existing company has substantial assets. Also, you'll need to prove you have good credit and a proven track record in the industry.
Expect that trying to obtain a bank loan to be very difficult and time-consuming.
2. SBA Loans
The Small Business Administration (SBA) also provides loans. The best option to buy a business is to apply for an SBA 7A loan.
If approved, you can get a loan of up to $5 million dollars. However, to qualify for the loan you must have the following:
Good credit
Provide three years of tax information
Provide personal finance information
Show prior experience in the industry
You must also prove you can put 20% down. However, you can also find that extra 20% through seller financing.
3. Seller Financing
Seller financing is another option. With this option, you ask the seller to provide financing in the form of a loan.
Typically this loan is amortized of a period of time and you pay the loan back using the proceeds of the business. This is an easier method to obtain than traditional financing methods such as a bank.
More Transparent
It's more flexible, can often be cheaper, and since the seller wants to be paid back, they will be more inclined to provide you with accurate financial documentation.
However, don't expect a seller to finance more than anywhere between 30% to 60% of the business unless you come armed with additional assets and can make a large down-payment.
4. A Leveraged Buyout
A leveraged buyout happens when the buyer acquires a company using a significant amount of borrowed money to buy the company. Often the assets of the company being bought are used as collateral for the loans such as:
Equipment
Real estate
Inventory
The assets of the acquiring company can also be used.
However, if things don't go as planned, it may have a largely negative impact on your rate of return. Your losses may also be maximized.
5. Get Financing Online
You have options when it comes to finding an online source to get a loan. You can choose a business loan, personal loan, and even a HELOC (home equity line of credit).
Shop around for the best interest rates. Also, not all lenders are willing to give money to buy a business.
We Help With Financing
Financing a business purchase isn't always easy because not every lender wants to deal with the risk. We're different.
We want to help entrepreneurs buy and sell their businesses with as little effort as possible. And we can help you with financing. Click here to learn how.
BizNexus -Learn More From Our YouTube Playlist:
BUSINESS ACQUISITION
Have you checked out our podcast?
THE BIZNEXUS ROUNDUP
Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.