Where to Get a Loan to Buy a Business

Merchant cash advances let business owners access a lump sum of cash by giving the lender—often a merchant services company—a portion of future sales receipts. A term loan is a traditional type of financing that businesses receive as a lump sum payment and repay over a set period of time. Terms usually extend anywhere from three months to 10 years, available loan amounts top out around $50,000 and APRs typically start near 9%.
Equipment financing funds the purchase of equipment or machinery, with the purchased equipment backing the loan. These loans can be used for anything from office furniture to manufacturing equipment, and terms can be as long as 25 years with limits of up to $1 million. Choosing the best business loan comes down to comparing loans you qualify for and determining which loan is the right fit.

Bank of America’s Preferred Rewards program can offer interest rate discounts and other perks. Bill Frost has been a writer, editor, journalist, and occasional graphic designer since the grunge-tastic ’90s. When not cranking out quips, Bill actualizes how to get a loan to buy a business beer money as a musician and podcaster. We've overviewed the main types of loans—now let's look at a few more details. She recently compared the price of four new name-brand tires at Costco with the price offered by a retail tire chain.

Compare how much you’re likely to pay up front and over the life of each loan you consider. Some lenders may charge higher borrowing costs than you’d get with standard business term loans as these loans cater to newer businesses and pose an elevated risk to lenders. Despite the SBA’s intention to provide small business owners with the funding they need, SBA loans come with an application process that’s challenging to navigate. Plus, it could be several months before the loan proceeds are disbursed to you.
Business loan agreement thoroughly, ask any questions you have, and even review it with a business advisor or attorney. Because of the relatively risky nature of acquisitions, it’s in your best interest to settle any outstanding debts in order to have any hope of being approved for a new loan. Still have enough cash on hand to make your loan payments each month. Although some sellers are looking to cash out and never look back, some may be open to being paid over time. You can negotiate this type of financing into your sales agreement and skip the bank altogether.

Online lenders typically have a fast turnaround but require decent credit scores. Business.org's favorite lending marketplace is Lendio, which partners with 75 or so lenders and matches you with the best loan offers after you submit your application. Credibly requires a credit check for its small business loans, but the minimum credit score required is low at just 500. This makes it a more accessible option for borrowers who may be worried that they won't get approved through a lender with traditional credit check requirements. But as with any other form of credit, applying with a lower credit score could mean you're subject to higher interest rates. Supplying collateral is a typical requirement for small business loans.
Depending on your preferred timeline, inquire about each lender’s application process and funding timeline. Learning each lender’s reputation and reviews from previous borrowers can also help you find the best lender for your business. Unsecured loans don’t require collateral, and therefore generally have lower maximum loan amounts and higher interest rates since lenders are taking on greater risk. However, if you’re after a smaller loan to cover short-term needs, this could be a good option as unsecured loans are usually quicker to set up. These applications are often measured in hours instead of the weeks it can take to receive an outcome for a secured business loan application.
A business plan is a formal document that outlines a business’ goals and how it plans to achieve those goals—both operational and financial. In addition to including an executive summary and an overview of the company, the business plan should demonstrate the company’s ability to repay a loan. For that reason, having a comprehensive business plan is especially important for applicants with bad credit. An income-based valuation, which focuses on how much cash flow your business is estimated to generate in the future. While this is impossible to know for sure, a strong financial history with an upward projection for revenue is a good sign for lenders. While applying for a business acquisition loan, you’ll be asked about the valuation of the business you want to acquire.

Starting a business without much cash in the bank might sound like a tall order, but trust us, it’s far from impossible. With a sprinkle of creativity, a dash of resourcefulness, and a good dose of determination, you can certainly kick off your dream venture without burning a hole in your pocket. A leveraged buyout involves using borrowed money and using the assets of the company being purchased to cover the initial cost. And there  are different types of SBA loans with clearly defined standards that vary by industry. But generally, you need to have fewer than 1,500 employees and less than $40 million in receipts each year.
As previously discussed, the equity injection can be reduced to 5% if you are also using seller financing and if the seller is willing to provide a standstill on their loan. Most lenders will not look at your acquisition if you cannot show that you have access to these funds. Key eligibility factors are based on what the business does to receive its income, its credit history, and where the business operates. Your lender will help you figure out which type of loan is best suited for your needs. In these cases, alternative forms of financing can come to the rescue.

With invoice financing, you stay in charge of collecting from your customers. When your customers pay you, you repay the lender that issued you the cash advance. Debt yield helps lenders assess the risk of issuing a loan to your business. Hotel lenders will use your net operating income to determine how efficiently your business runs. Hopefully, we've convinced you of the massive benefits of securing an SBA loan despite the rigorous process it requires. Imagine the different ways you can stretch your cash to make it work for you.
Online lenders may also approve businesses for financing with a year or less of business history. Seventy-three percent of entrepreneurs who opted for business loans found increased capital availability to be the biggest advantage. Availability of financing was the biggest benefit for the 60% who utilized savings and the 72% who borrowed from friends and family. Among all funding methods, $25,001 to $55,000 was the most commonly reported funding amount used to start a business. Thirty-seven percent of entrepreneurs who chose business loans and 21% who drew from personal savings relied on this amount to fund their venture. You can get better rates on a loan to buy an existing business if you have a good credit history or can provide collateral for the loan — usually property.
These are among the most affordable small business loans, offering long repayment periods and low interest rates. Business line of credit provides the ability to access capital incrementally as you need it. That could include large purchases that equal your entire credit line, or smaller expenses such as marketing that only require a little capital outlay. Small business loans to purchase the property can sometimes be a challenge. Below we’ll cover a few of the most common types of investment property loans along with insights into how they work.

Venture capital firms, on the other hand,  seek to invest in fast-growing startups that have the potential to be lucrative businesses. Few things are more exciting than coming up with a business idea you believe in. But bringing that idea to life typically requires an investment — and funding a business can be tricky for entrepreneurs without a financial history or fully developed product. Partner buyouts are complex and you’re probably not equipped to navigate its technical and legal aspects. Even if you’re ending your partnership on great terms, the relationship could sour if either side feels they’re getting swindled.