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.

More related posts handpicked for you…

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.

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.