If you’re dreaming of buying an existing business, you may have already considered finding out how to get a business acquisition loan. While applying for a business loan may be intimidating, we’ve got all the information you need to get started in our guide to financing your next business acquisition.
The Many Benefits of Buying an Existing Business
Whether you have a specific industry in mind or just a general idea of your ideal business, finding companies for sale can be extremely beneficial. Here are some reasons why you might want to buy an existing business:
Convenience
This is arguably one of the biggest reasons for buying an existing business: You don’t have to start from scratch; you get to use what’s already there.
Reputation
Buying an established company is your quickest way to jump into whatever industry you want without having to build your own reputation and brand from scratch.
Experience
If you’re buying an established company, it probably already has a solid foundation, which will make it easier for you to take your business to new heights.
You Get a Ready-Made Customer Base
If you’re buying a company that already has customers, chances are good that those people will stick around—and maybe even grow with you over time.
Financial Security
It might be easier for you to find financing to buy an established company than it would be for you to launch your own brand from scratch.
There are a number of different ways that you can go about finding businesses for sale. Take your time, conduct your research and consider all of your options before moving forward. Ultimately, you want to find a company that fits your skills and personality. If it doesn’t feel right, don’t force it – there will be other opportunities down the road.
Are There Any Different Types of Loans for Buying a Business?
There are no regulations on what sort of finance options you can use when purchasing or selling a business. The nature of your transaction and your own financial situation will ultimately dictate which finance options are available to you. For instance:
Business Acquisition Loans
The most common way for small business owners to finance buying a competitor or starting up is through what’s called a business acquisition loan. These loans allow you to borrow against your future earnings.
Asset-Based Loans
These loans are there for you to use as much or as little of your assets (vehicles, buildings, equipment, and other items with equity value) as collateral for your loan.
If you have enough collateral, asset-based lenders may be willing to approve you for a larger amount at lower interest rates than those offered by banks and credit unions. This is helpful if you’re trying to buy something that costs more than what they consider a normal amount.
Business Lines of Credit
For small businesses that operate in just one location and have low overhead, business lines of credit are often available through your bank or community lender for as little as $5,000.
Funding your acquisition can be complex. But there are plenty of options for aspiring business owners, including federal loans.
According to Lantern Credit, “There is a wide range of loans offered by the Small business Administration (SBA), including the SBA 7(a) loan.” If you plan to fund your acquisition with debt, make sure you have enough cash flow from operations to service that debt.
If you’re interested in buying a start-up company with no revenue or assets, it would likely be difficult to get financing through traditional banking sources. So first, you should learn how to get a business acquisition loan.
Also, speak with a bank or other lenders before jumping into your transaction. They can help you with ways to increase your chances of getting approved.
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