I Need A Loan To Buy An Existing Business
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Lenders review a variety of criteria when evaluating your application for a business acquisition loan. The importance placed on each factor may vary depending on the type of loan you apply for. For instance, a term loan, such as an SBA business acquisition loan, will typically require a down payment minimum. A line of credit application may place more emphasis on your revenue and cash flow.
Business acquisition loan amounts range from $250,000 all the way up to $5,000,000. The amount you qualify for depends on a number of factors, including your credit score, company revenue, and existing debt. Every lender will review these factors to make sure your company can safely handle your new loan payments.
Because your lender will need to get approval from the SBA to back your loan, the application process and paperwork for an SBA 7(a) loan can be lengthy. However, these loans typically boast better terms than traditional small business loans, and sometimes even come with counseling to ensure your business runs efficiently.
One distinction: if you are a sole proprietor, you will not need to provide a separate personal guarantee for your SBA loan because you execute the note yourself as a borrower (instead of as a business).
All users should perform their own due diligence and research. Nothing on this website is an offer or a solicitation for a loan. This website does not endorse or charge you for any service or product. None of the information on this site constitutes legal advice. We are not affiliated with the Small Business Administration (SBA). If you need to visit the SBA directly please click here: sba.gov
Having your own business is great. Building one from scratch Really hard. Which is why some entrepreneurs opt to buy an existing business outright. There are other reasons to buy a business too, like acquiring an up-and-coming competitor, or just building your investment portfolio.
At some point, while jumping through legal hoops, you might have forgotten that you just became a small business owner. Congrats! Your new life awaits. And if your brand new business needs bookkeeping, Bench can help with that.
Buying an existing business has many advantages over starting an entirely new one. Existing businesses typically already have employees, clients, inventory, processes, cash flow, and historical financial performance. While operations can begin right away, buying an existing business presents several challenges that should be understood before you begin the process.
Buying an existing business will often cost more money upfront than starting one from scratch. But, much of the startup legwork is already done. It is important to explore the business opportunity thoroughly and with professional guidance to understand potential problems or debts that will come with the business purchase. Existing problems can remain hidden until after the final sale, like damaged or outdated equipment or inventory, issues with real estate property or location, or heavy dependence on a single client.
Examine revenue and costs closely. For example, if you are purchasing a restaurant, look at food and beverage sales, labor costs, and food costs. Look at these numbers by month and by year and check averages. Also examine the cost of utilities, rent, insurance, and taxes. If the current owners owe a mortgage on the business, you need to include that cost in your business plan too.
Unless you are very familiar with the business for sale (you either worked there or frequented it regularly) you should find out if the location has been profitable for the existing business. Is it visible enough to bring in foot traffic Is there enough parking to encourage business If the space is rented, then you must speak with the landlord about rent and find out if the cost will increase.
Buying an existing business is one way of getting your new venture up and running. Perhaps a business owner is getting ready to retire and wants to pass her shop to someone ne