Amazing Ways To Get Funding Right For Your Business Off the Ground

Amazing Ways To Get Funding Right For Your Business Off the Ground

So you are looking for an acquisition loan to expand your business, here is what you need to know. There are many advantages to purchasing a business over starting a new business. Purchasing a new business is advantageous because the new business brings with it a customer base, market knowledge and a record of operating expenses and revenues. Also, the new business will provide experienced employees and institutional knowledge. Purchasing a business that can offer all the feature will be expensive.

Some entrepreneurs are self-funded and can afford to finance a business purchase, but most entrepreneurs can not. They look to get a business acquisition loan to purchase a business. Successful entrepreneurs and not so successful entrepreneurs turn to a financing mechanism to purchase a business.

Types of Business Acquisitions

So what is a business acquisition loan? Simply put, it as a loan that is needed to buy a business or new franchise. So you now need to know what are the types and requirements of getting a business acquisition loan and what are the best options for your particular financial situation. There are a few types of loans available to entrepreneurs, and they include:

  1. SBA Loans:

SBA Loans are loans that are funded by the Small Business Administration, which a government-backed program. The SBA loans are very popular, and they have the best interest rates and repayment plan. However, they are tough to get and you need a flawless credit score and it takes a long time to get funding.

  1. Alternative Lending:

When a borrower uses a combination of funding to achieve one goal it called alternative lending. The types of funding include term loans, working capital, business line of credit, equipment financing and SBA loans.

  1. Seller Financing:

When a business owner or entrepreneur commit to funds a purchase, they are offering seller financing. With this financing, the owner agrees to a price that is less than the sale price. The difference between the sale price and the agreed-upon price is covered by a promissory note, which is a debt contract that states the difference will be paid back over time.

  1. Home equity Financing (HELOC):

A loan that is secured by your home is called a HELOC. It works the same way as a line of credit, and you can borrow up to your available equity.

Prepare for Success

Now, that you know the type of finances that are available. Your next step is to prepare a list of things that are needed before applying for a new business loan. The list should include the following.

  1. A letter of intent:

Before a lender will commit to a project, a signed letter of intent from the seller is needed, without this letter getting a loan can be extremely difficult.

  1. Credit score:

Lenders require a credit score of 650 or above if your score is lower than 650 it will be tough securing finances. You and your partners should be prepared to submit your credit history as well.

  1. Tax Returns:

Lenders will require three years of tax returns from you and any partner that has more than 20 per cent ownership in the business. Funding will be delayed if required documentation is not available at the time of application.

  1. Personal investment:

Lenders expect you to invest your assets, typically 20 per cent, in the business the same way home buyers are expected to make a down payment.

Once the lender verifies all your documents, an application will be completed and submitted. Upon submission, the app will forward to underwriting. During unwriting, your creditworthiness, the performance of the existing business, the amount requested and the industry risk will be used to determine your ability to repay the loan.

Now that you know the types of acquisition loans, the loan process, and what is needed to apply for an acquisition loan. You currently have the know-how and the ability to obtain financing for your business purchase.

Categories: Business

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