Everything You Need To Know About Business Acquisition Loans

by Henry S. Growing Your Business Has Never Been Easier

Buying an existing company is one of the most important means of growth of your business, especially if the business has strong credibility, an established customer base, and a proven track record.

It can be a challenging and time-consuming endeavor to find the right business to acquire. Searching and finding the right small business funding to finance that acquisition can even more complicated.

Wondering what are the different business acquisition loan options? Well, you have come to the right place. In this post, we’ll share all the important things you need to know about this great small business financing.

What is a Business Acquisition Loan?

Like the name suggest, a business acquisition loan is used for acquiring or opening a new franchise. The amount of loan and rate of interest will depend on the business you’re buying and your own qualifications. The loan amount can range from $5,000 to $5,000,000.

This loan can be used for a variety of different challenges, from purchasing a reputed company to growing your existing company by acquiring a competing company, purchasing a new franchise, and avoiding the start-up period of building a business.

What are the qualification requirements of a Business Acquisition Loan?

Since there are various types of business acquisition loans, qualification requirements depend on the type of loan you’re applying to. Here are some of the common factors that lenders consider when reviewing your personal and business finances.

Personal Credit Score - You must have a credit score from 650 to 700 or above to qualify for the loan
Business Credit Score – You must have a decent business credit score (at least 600) to get a business acquisition loan.
Tax Returns – You need to provide three years of personal tax returns and also corporate tax returns on the business you’re going to acquire.
Business Financial Statements- You need to provide cash flow statements, balance sheets, and P&L statements of the business you’re going to acquire.
Outstanding Debt – You need to provide the list of all outstanding debt of your business.
Business Valuation – You need to provide a formal valuation of the business you’re going to acquire.
Business Plan – You need to provide the plan and strategy to grow both your and acquired business.

What Documents do you need To Apply for a Business Acquisition Loan?

Business Plan
Business Tax Return
Personal Financial and Background Statements
Balance Sheet
Business Debt Schedule
Personal Tax Return
Business License
Bank Statement
Business Lease Agreement

What are the benefits of a Business Acquisition Loan?

Business acquisition loans are a great financing option for small businesses because they:

Can be used to finance portions of the business that are not secured by collateral.
Make it possible for entrepreneurs to acquire and expand sooner than would otherwise be possible.
Help growing business with limited credit history to secure desired capital.
Have quick turnaround times, with some online alternative lenders offering approval in as little as 24-48 hours.

What Are Different Business Acquisition Loans?

The SBA Loan

Loan Amount – From $30,000 to $5 million

Interest Rate – Anywhere between 5 to 10 percent

Repayment Terms – 10 years for most loans and 25 years for real estate loans

Business Term Loans

Loan Amount – from $25K to $500K

Interest Rate – Though the interest rate is fixed, the borrower can negotiate

Repayment terms – 5 to 10 years

Startup Loans

Loan Amount – $500-$750,000

Interest Rate – 0-17%

Repayment Terms – 6 months to 5 years

Equipment Financing

Loan Amount – $5,000-5,000,000

Interest Rate – As low as 7.5%

Repayment Terms – 1-5 years

Final Thoughts

There are a plethora of options to secure financing for your small business. However, if you’re planning to acquire an existing business, then applying for a business acquisition loan is the perfect decision. Use an online lending marketplace to find and compare a variety of business acquisition loan offers from multiple lenders. Once approved, you can get the cash into your bank account in as little as 24-48 hours.