Stress-Free Tips for Securing a Business Acquisition Loan

Thinking about buying an existing business or franchise? It’s an exciting way to fast-track your growth. You get an established brand, a loyal customer base, and more—without all the stress of building from scratch.

But securing the right financing? That can feel a bit daunting. No worries though—this guide will help you get through the process and make it much smoother.

What’s a business acquisition loan?

In simple terms, a business acquisition loan is designed specifically for purchasing an existing business or franchise. The loan amount can vary, but it typically ranges from $5,000 to $5 million. Depending on the business you’re buying and your qualifications, the terms will vary.

Here are a few reasons why business owners love these loans:

• You’re buying into a business that’s already established
• You can buy a competitor to grow your business
• It saves you the time it takes to build something from the ground up
• You can use it for franchise purchases or buyouts

What do you need to qualify?

Lenders are pretty thorough when reviewing your application. Here are the key things they’ll want to know:

• Personal credit score: Usually, you’ll need a score between 650 and 690 to be in the running. Anything above 700 is even better!
• Business credit score: They’ll also look at the business you’re buying. A solid business credit score makes a big difference.
• Tax returns: Expect to share your personal and business tax returns for the past 3 years.
• Business financials: Lenders will want to see your business’s financial health with documents like balance sheets, profit and loss statements, and cash flow reports.
• Outstanding debt: You’ll need to be upfront about any existing business debt.
• Business valuation: Lenders might require a third-party valuation to determine the fair value of the business.
• Business plan: A strong plan will show that you know how to manage and grow the business once you take the reins.
• Relevant experience: If you’ve worked in the industry or have experience running a business, it’ll help strengthen your application.

The loan application process

Once you’re ready, here’s what you’ll need for the loan application:

• A business plan
• Tax returns (personal and business)
• Financial statements
• Background statements (personal and business)
• Debt schedule
• Bank statements and more

Types of business acquisition loans

There are several different loan options, so it’s good to know which one suits your needs. Here are a few popular types:

SBA 7(a) loans

The SBA loans are government-backed loans that offer long repayment terms and competitive rates, ranging from 5% to 10%.

Pros: Great terms and high loan limits.
Cons: You’ll need a good credit score (650+), some collateral, and a solid business history.

Business term loans

This type of loan provides a lump sum that you pay back in set installments. It’s ideal for straightforward financing.

Pros: Fixed rates and easy repayment schedules.
Cons: May have shorter repayment terms and lower loan limits.

Startup loans

For newer businesses, a startup loan can help cover acquisition costs.

Pros: Easier to get with good credit.
Cons: Often requires collateral.

Equipment financing

If the business you’re buying includes equipment, this type of financing covers that.

Pros: Lower interest rates, and you don’t need to put down a lot of money upfront.
Cons: Loan amounts are tied to the equipment’s value.

Wrap-up

Getting a business acquisition loan doesn’t need to be stressful! With the right prep, a solid understanding of the loan options, and knowing what lenders are looking for, you’ll be all set to secure the financing you need.

And once you’ve secured that loan, don’t forget about keeping your financial processes running smoothly. That’s where Forwardly comes in. We make managing your payments simple and stress-free, so you can focus on growing your new business instead of getting caught up in the cash flow struggles. With instant payments, automation, and no monthly fees, Forwardly takes care of the nitty-gritty of business finances, giving you more time to make your acquisition a success.

Ready to make the most of your business acquisition? Forwardly’s got your back!

Ready to dive in? Start gathering your documents and exploring your options today—your dream acquisition is closer than you think!