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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.