The Top 5 Loans to Finance Your Business Acquisition

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.

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.