5 Factors to Consider When Purchasing an Existing Business

Purchasing an existing business

Here are 5 factors to consider

You want a business that has a blueprint for success. Here are five critical factors to look for when purchasing an existing business.

Purchasing an existing business

Starting a business from scratch is one of the most stressful things that a person will ever do. The stress associated with doing it can be too much for some people to take.

It's why many people with an entrepreneurial spirit prefer purchasing an existing business and working to perfect it over starting a business from the ground up. There will obviously still be some stress involved, but it won't always be quite as overwhelming.

Are you interested in potentially purchasing an existing business and taking it to the next level? Here are five important factors you should consider before you do.

1. Is the Existing Business the Right Type of Business for You?

Whether you start a business from scratch or buy an existing business, the business that you own needs to be something you feel passionate about. You should be excited to jump out of bed every morning to get to work on your business.

If you don't feel this way about a business that you're thinking about buying, it's not going to be a great fit for you. Even if there is a lot of money to be made with the business, what good will it be if you don't enjoy doing everything it'll take to make it?

2. Does It Have a Business Model That Seems to Be Working?

One of the best parts about purchasing an existing business rather than starting a new one is that it'll come with almost everything you need to run it from day one. It'll have:

• A name and an established brand

• A team of employees

• A loyal customer base

• A lot of inventory

But in addition to having these things, you should make sure that the business also has a business model that is working. This business model should be set up to continue working well into the future.

If you have to come in and start making wholesale changes to a company's business model, it could end up costing you more than it would have to start a business from scratch.

3. Do You See Areas in Which You Can Improve the Business?

You want a business that you buy to have a business model that is working. But you also want to have the opportunity to improve the business in different areas.

For example, you might know for a fact that you can use your current business connections to get the materials used to make a company's products for cheaper than they're making them for now. By using these materials and improving the production process as a whole, you can make a business that you buy more profitable right away.

Check out this video if you are looking to buy a website, eCommerce, an app, or SaaS Company

4. Are You Confident in the Business' Ability to Grow?

By improving small things about an existing business, you should be able to generate more money and make purchasing the business one of the best decisions you ever made. You should also be able to get the business to grow into something larger than it is now.

Are you prepared to take on that challenge? And furthermore, is the business you're considering buying scalable enough to make it worth your while?

You need to have confidence in the business's ability to grow and expand over time. Otherwise, it might not be a great investment on your part over the long run.

5. Can You Afford to Buy the Business?

One drawback often associated with purchasing an existing business is that it can cost more than starting a new business. You're paying a premium to get your hands on a finished product.

But the good news is that most lenders are more willing to lend money to someone buying an existing business as opposed to starting a new one. They see helping someone buy an existing business as a less risky move.

There are also lots of ways to finance a business purchase if you want to do it. Still, you should carefully consider whether or not a business fits within your budget before you even think about buying it.

Get the Help You Need When Purchasing an Existing Business

Purchasing an existing business can be a daunting experience if you've never done it before. You need someone by your side to guide you in the right direction.

We have a large selection of businesses for sale and can help you pick out one that's a good fit. It'll make the entire experience more manageable for you.

Check out some of the existing businesses for sale through us today.

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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.

How to Finance a Business Purchase With Fair to Poor Credit

Finance a Business Purchase

With Fair to Poor Credit

Do you want to finance a business but you've had some credit challenges? Read this article to learn how to finance a business purchase with fair to poor credit.

How to finance a business purchase

There are 30.2 million small businesses in the US. Many folks prefer to own businesses because it gives them the creativity and profitability they have always dreamed of.

If you have student loan debt or a business venture that failed in the past, you may have poor credit.

You may also, however, find yourself with the opportunity to purchase a business that would be a great fit for your skills and experience.

If you are wondering how to finance a business purchase with fair or poor credit, you are not without options. Here are some ways to finance the purchase of the successful business you have always hoped to own.

1. Check Over Your Credit Report

Your own credit may not be as bad as you think. There may be payments that were not recorded, so you can contact companies with proof of payments.

You can also get your score back up by paying down some debt gradually. This may involve getting a second job for a little while, or finding another way to supplement your income.

2. Meet With A Small Business Administration Counselor

You can make an appointment to present your entire plan to a Small Business Administration (SBA) counselor.

They can give you tips on how to improve your plan so it better suits what lenders are seeking. The lender will also already have existing relationships with SBA lenders.

When you visit your counselor, it is important to make your plan look as professional as possible. Demonstrate how your business has been profitable and why you are capable of running it. Highlight the profitability of the business you want to buy, as well as its future growth potential.

When applying for a loan from anywhere, you must fill out an application. Bringing supporting documentation and dressing professionally will also help you.

3. Get A Microloan

If you can't get a loan from a bank, look for investors within your network, as well as micro-lenders.

Microloans are specifically designed for those who can't get loans elsewhere, and the SBA guarantees them. The downside is that interest and fees are higher. There is also a credit limit of $50,000.

4. Get A Bad Credit Loan

Many banks give out bad credit loans. While they initially come with a higher interest rate and fees, many lenders will renegotiate if you are making your payments on time.

5. Borrow Against Your Home

If you are certain that the business you wish to purchase will be successful, you may be able to get a loan from a bank by using your house as collateral. Take out a second mortgage or take out a home equity line of credit.

6. Who You Know

Your family and friends won't ask to see your credit report if you can convince them your business will be successful. You can ask them for funding and talk about their involvement in the future of your business.

7. Government Financing

Some federal and state government programs will finance your business if you meet certain criteria. You may be a veteran or involved in certain types of research. Depending upon your business and situation, they may not even require repayment.

How to Finance A Business Purchase With Fair to Poor Credit

If you have found the company of your dreams, you may be wondering how to finance a business purchase even if your credit isn't great. With a little homework and the right connections, you might find yourself the owner of a profitable business in no time.

For more information on investing in businesses, read our blog 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

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.

5 Tips on Financing the Purchase of an Existing Business

Purchasing an Existing Business?

Here are 5 tips to help you finance the acquisition

There are a number of methods you can use when financing the purchase of an existing business. Here are a few that we suggest you try.

Financing the purchase of an existing business

More businesses are being sold than ever before. In fact, a record number of small business owners are selling their companies. According to this data, the number of business listings increased by 8 percent from the prior quarter. 

In a world awash with excess capital and with demand for reliable cash flow returns on the rise, prices for existing businesses & assets have been on the rise.

Popular acquisition targets typically have reliable, recurring revenue and cash flow, with an established brand and loyal customer base. With prices continuing to trend up, you’ll need to have your ducks in a row before you decide on the best way to finance an acquisition.

Read on for a guide to financing the purchase of an existing business. Explore 5 tips for purchasing a business that is highly effective.

1. Apply for an SBA Loan

The United States Small Business Administration (SBA) is a great resource for entrepreneurs. They work with lenders across the nation to guarantee loans against default.

Lenders are willing to take on more financial risk due to the government’s backing. SBA loans offer more favorable terms and rates than conventional funding sources.

There are a number of different loan programs to apply for. The most popular are the 7(a), 504, and microloan programs.

2. Consider Seller Financing

In some deals, the seller is willing to finance a portion or all of the deal. The benefit to the seller is that they can turn a greater profit.

There are also a number of advantages to the buyer. Perhaps most important is the ease of access to capital.

Also, another benefit is the speed of the financing deal. Seller financing is proven to be a faster alternative than conventional loans.

3. Make a Sizable Down Payment

A significant down payment is an effective method for reducing company risk. Like purchasing any asset, a down payment improves your financial position in the company. It reduces the amount of interest that you will pay over the life of the loan.

For business acquisitions, a large down payment is required. While mortgages require 20 percent, a business purchase usually takes even more.

The more cash you bring to the table the better. Many small business owners use personal funds for a down payment. For larger acquisitions, the down payment may require multiple investors pooling their resources together.

4. Angel Investors

There are increasingly common scenarios today where wealthy investors, feeling flush after 10 years of public market gains and looking to diversify into something reliable & attractive going forward, are interested in financing entrepreneurship through acquisition (ETA) as a viable investment vehicle. If you can sell those types of investors on your personal “why” story and your credentials to run a business, this can be a great option if you can get access.

5. Getting Creative

To finalize a business purchase, sometimes you have to get creative. These cases may call for a leveraged buyout or assumption of debt.

In a leveraged buyout, you trade-off existing assets in lieu of capital. An assumption of debt means that you are acquiring the company’s liabilities as well as their assets.

A Recap of Financing the Purchase of an Existing Business

Starting a business from scratch is hard work and risky. Many entrepreneurs choose to purchase an existing business instead and fund their entrepreneurial efforts from the existing cash flows of an operational business.

This option allows an entrepreneur to acquire a proven business model. Entrepreneurs turn to methods like SBA or seller financing to close a deal. If you want to learn more about financing the purchase of an existing business, Login to get matched.

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.