subject: Options And Basics Of Small Business Acquisition Loan [print this page] To buy an existing business is less complex than to start and develop a new business. However, it also depends on buyers potential and interest and of course the kind of business he wants to buy. Purchasing a business will certainly require financing. So, to meet the financial a buyer would opt for business acquisition loan or financing. Furthermore, a few things need to be considered by a buyer before getting into a business of acquisition loan which contains reviewing the financials of the business including real worth of the business, value of real estate, machinery and equipment, inventory, and other fixed assets.
A borrower can also increase the viability of loan approval if he considers the following things as per the lenders perspective.
Down payment: A lender would always be interested in the percentage of initial amount invested as down payment by a buyer.
Credit score: Your credit worthiness plays a vital role if you are seeking for business acquisition loan. Credit rating will give lender an idea how worthy you are as a borrower in terms of repayment.
Security or collateral: In order to secure the business acquisition loan a borrower or buyer should have fixed assets as collateral against loan. It reduces the risk of any default.
Business plan: Lender will definitely want to review the business plan before any loan approval. A business plan will also show your understanding of the particular industry and at the same time the lender would get to know how you plan your finances and their projection.
Although, business acquiring provides various financing options yet, it can be a confusing task to choose the most suitable one.
Banks and financial institutions: Usually banks and financial institutions are the first choice of a borrower to get money from. Yet, it is very necessary to review their fundamentals of approving loan. Your current or past good relation with banks and lending institutes can also work as an advantage.
Family and friends: Loan from friends and family can also be treated as a suitable option of business Loans acquisition financing. Moreover, if you take money from a person of the similar industry then you can be guided well about the know-how of the industry.
Seller financing: At times sellers are also interested to invest a share in the business. Otherwise, you as a borrower may also ask to make partial investment in the business.
Equity investors: Considering the amount you need to raise for your business you can seek the option of venture capitalists as equity investors. A venture capitalist will work as a financial partner and also acquire the ownership stake in a business.
SBA: In order to get financing, SBA Loan (Small Business Administration, U.S.) 7(a) loan program can also be an alternative to consider. This program does not only assist in business operations or expansion but also provides acquisition loan. The support of SBA makes things viable for both the buyer or borrower and the bank or lender.
