Beginner’s Guide to Business Acquisition Loans
Statistics show that around 10,000 businesses are bought and sold in the United States each year. That number doesn’t take account of new businesses started from scratch, just those that are already in existence and change hands.
If you’re looking to undertake a new venture, there are many reasons why buying an existing business could be the right move for you. Chief among these is that you’ll get to skip the hard work and lack of profitability that comes at the outset of the journey of most companies.
However, if you don’t have a lot of capital to work with, you may need to consider the option of business acquisition loans. These loans help people to get started on their business journey if they’re trying to purchase an established entity.
To keep learning about business acquisition loans and whether they might be for you, keep reading.
What Are Business Acquisition Loans?
If you’re buying a business, chances are you’re going to need some sort of external financing. Unless you’re selling a major asset or you have huge savings, a loan could be your best bet.
As the name suggests, a business acquisition loan is a type of finance you can get from a lender which will assist you with the purchase of an existing business.
What Will You Need to Get a Business Acquisition Loan?
As is the case for any type of loan, a bank or other lending outfit is going to want assurances that you’re a good candidate for a loan. To this end, there are a few things you’ll have to present when applying for your business acquisition loan. These include:
- A rundown of the assets you own
- Your employment history, including details of any businesses you’ve owned previously
- Your credit history
If these items are all in order, you should have a much easier time getting approval on your business acquisition loan application.
Types of Business Acquisition Loan
There are several different types of business acquisition loans. These vary on the basis of the size of the loan, the repayment structure, and whether or not government backing comes into play. We’ve looked at a few of the most important types of business acquisition loans below.
Term Loan
This is a conventional medium-term loan. People often use these loans to buy cars or new homewares.
SBA Loan
This is a federal-government-backed option. Some SBA loans can be for millions of dollars.
Equipment Financing
If the business you’re acquiring has a lot of expensive equipment, such as machinery, equipment financing could be an option. It essentially involves borrowing against the value of your equipment.
Getting the Right Start for Your New Business Venture
Borrowing money to fund a business project can be a daunting prospect. However, business acquisition loans are often the best way to set out on the business adventure of your dreams.
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