Loans

SBA loans are bank loans backed by the US Small Business Association in amounts of up to 85%. Because there is less risk for the bank if you default, the bank can offer you a lower interest rate and longer repayment terms than they otherwise would. If you need a loan to acquire a business, an SBA loan is one of the highest-quality loans you can get. However, SBA loans can have lengthy application processes, and it can take a while to get accepted and for the funds to reach your account.

That said, it is still possible to get a business acquisition loan through the SBA, even if you don’t have an existing business (particularly if you’re purchasing a registered franchise). You can consult the SBA’s lender match service to find eligible lenders for your business purchase as well as the other informational resources the SBA has on its website.

As mentioned, banks do offer loans for business acquisitions, but the requirements are more strict than those of online lenders. The bank will scrutinize your credentials, the finances of the business you want to acquire, and other information related to your proposed business purchase. However, bank loans have terrific rates, and if you have the right credentials, it’s not impossible to get a bank loan — even if you don’t have an existing business. It will help to have relevant experience in the type of business you’re buying, partnered with steady personal income, and good credit.

Depending on what type of business you’re purchasing, equipment and machinery could be among the largest expenses involved in your sale. If equipment is one of your new business’s major assets, equipment financing might help you afford the sale. While not a traditional loan, equipment financing lets you borrow against the equipment’s value, meaning there is no additional collateral required. Besides not requiring you to put up any collateral (other than the equipment itself), equipment financing contracts usually do not require a credit check.

Of course, while equipment financing alone won’t allow you to purchase an entire business, it might help you better afford a business acquisition.

Without question, it is easier to get a loan to buy a business if you already have an existing business and want to acquire another business of similar scope. If you already own a stable, profitable business, it’s definitely worth looking into a bank loan to expand your business with an acquisition.

However, even qualified business owners may not want to go through the arduous process of applying for a bank loan and might turn to an alternative/online lender that offers business acquisition loans. Some online lenders provide business expansion/acquisition loans with rates and terms similar to what a bank might offer, but with a much easier application process and quicker time to funding. Most of these lenders do still require two years in business, though some only require one.

Crowdfunding or P2P loans can be another option if you’re looking for business acquisition money, though crowdfunding by itself likely won’t pull in enough funds to cover the entire business purchase. There are various types of crowdfunding for businesses, including equity-based crowdfunding and rewards-based crowdfunding. Even charitable giving sites can sometimes be used for business.

Crowdfunding could be an option for you if (1) your business purchase will enable you to produce an innovative product with which you can reward your backers, or (2) the purchase will increase your business’s net worth, which you can share with your backers in the form of equity.

Similarly, peer-to-peer business lending allows business owners to borrow directly from interested investors in an online marketplace or even from peers in their personal networks. A third party provides an online platform that packages the loans and may charge a fee for their services. Because multiple parties typically fund P2P loans, the concept is similar to crowdfunding.

With crowdfunding and P2P lending, having an innovative, community-minded business plan and a strong online presence will help convince would-be investors to fund your business purchase. Generally, it helps to have some business experience/time in business for lenders/backers to be willing to take a chance on you.