How To Get A Business Loan To Buy An Existing Business
If you already have an existing business you might be able to make use of asset refinance to purchase a new business. However its typically easier to get a loan to buy an existing business than it is to get a startup loan to get a brand new business off the ground because lenders can see the track record of the business youre planning to buy.
The most obvious form of business finance for many people is visiting your bank for a business purchase loan.
How to get a business loan to buy an existing business. Before ever stepping into the bank or applying online for a small business loan you need to check the Personal Property and Security Register to see if there are any outstanding debts on the assets of the business you wish to purchase. How to get a loan to buy a business. 350000 to 5 million.
In general you must be a prime borrower to qualify for an SBA loan. Rather the SBA guarantees up to 85 of the loan in the case that the borrower defaults. You can of course go through a bank to get the loan you need to cover your business costs.
Assuming these debts might also come at a high cost adding up to the total cost of the business. The SBA provides small business assistance in many ways including helping them get funding that would allow an owner to buy another business. When purchasing an existing business the bank before offering the loan must look at the debts acquired by the business.
An SBA loan is not actually provided by the SBA. To get a business loan you need to assure them that it will be successful enough and that the lender wont lose money. Surely investors know that every investment has inherent risk but in order to be financially viable they need to be at least 90 sure that you will not default on your loan.
As existing businesses will have full financial records available and a known trading history it can be easier to prove to cautious lenders that you are taking on a relatively low risk proposition. Applying for a business loan. Use an SBA Loan to Buy an Existing Business.
Youll need this for both negotiating the price of the business sale as well as for financing the purchase. A loan utilizing the Small Business Administration SBA is by and large the best option for small businesses and entrepreneurs. Minimum 70000 cash-on-hand or highly liquid to satisfy down payment and post-closing liquidity requirements.
Provide a formal business valuation. Businesses would be smart to apply for a loan using the 7 a loan program which is the SBAs primary vehicle to support large and small loans to. Once the debts have been established you and the partners must assume the debts at the approval of the debtors of course.
In fact Lendido says there are traditional lenders who prefer to finance small business owners who are purchasing an existing business provided theyre willing to put down somewhere between 20 and 50. However its certainly not impossible and it helps to provide a decent down payment. In addition to the traditional financing documentation for both you and the existing business youll also have to.
If youre buying a business or franchise your lender will look at slightly different criteria to ensure that youre investing in a viable business and in turn will be able to repay the loan. Starting a business from scratch can be challenging. Franchising or buying an existing business can simplify the initial planning process.
This is generally a safe option because you can get a relatively low and stable interest rate and have access to refinancing options. More on this in a bit. This works by allowing the finance company to buy your assets from you for an agreed price which therefore gives you a cash sum to put towards purchasing your new business.
For most small business loans a lender will review factors like your credit history time in business and revenue to determine if you qualify.
