Business acquisition loans are used to purchase or merge with an existing business. While there’s no specific type of business acquisition loan, you can finance a business purchase with a term loan, an SBA loan, equipment financing or even a line of credit.
Business acquisition loans are available from banks, credit unions and online lenders. Banks offer some of the lowest rates, but online lenders tend to have a faster turnaround. Here’s a closer look at some of the top options to help you choose.
Best business acquisition loans
Best loan marketplace: Lendio
Lendio business loans
4.8
★★★★★
Finder score
If you want to compare different business acquisition loans quickly, consider the Lendio marketplace. Lendio lets you search 75+ partners with just a single application. It offers term loans and SBA loans up to $5 million — plus equipment loans, commercial real estate loans and more.
Past customers rate Lendio highly, praising the company for its fast, streamlined application process and helpful loan officers. While marketplaces like Lendio can be a great place to search for a loan, you may get a large number of marketing calls and emails if you qualify.
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Pros
- No fees to use the service
- Options for bad credit
- Wide range of financing options
- Excellent customer reviews
Cons
- Not a direct lender
- Marketing may continue after being funded
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| Loan amount | $1,000 – $5,000,000 |
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| APR | Starting at 3% |
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| Min. Credit Score | 500 |
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| Loan term | 3 months to 25 years |
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| Requirements | Operate business in US or Canada for 6 months or more, have a business bank account, minimum 500 personal credit score, at least $20,000 in monthly revenue |
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| Loan amount | $1,000 – $5,000,000 |
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| APR | Starting at 3% |
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| Min. Credit Score | 500 |
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Best term loan: Bank of America
Bank of America business loans
3.6
★★★★★
Finder score
If you're an established business owner, Bank of America has some of the lowest rates available. Its Business Advantage Term loan is an unsecured loan that can be used for buying a business and offers fixed rates as low as 7.5%. And you could shave an additional 0.25% to 0.75% off that rate with BofA's relationship discounts.
To qualify, you'll need a credit score in the high 600s, at least two years in business and a minimum annual revenue of $100,000. For loans over $50,000, you'll need to work with a dedicated specialist at the bank. Because it's a traditional bank, the application process may take longer than with an online lender.
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Pros
- SBA Preferred lender
- Potential for reduced rates
- Full suite of business banking products
Cons
- Origination fee of $150
- Pattern of customer complaints
- Online application may not be available
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| Loan amount | $10,000 – $100,000 |
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| APR | Starting at 7.50% |
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| Min. Credit Score | 700 |
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| Loan term | 12 to 60 months |
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| Requirements | Good credit, 2+ years in business, $100,000+ revenue |
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| Loan amount | $10,000 – $100,000 |
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| APR | Starting at 7.50% |
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| Min. Credit Score | 700 |
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Best SBA loan: The Huntington Bank
Huntington National Bank SBA loans
SBA business loans are long-term loans of up to 25 years and are partially backed by the government, which can mean more competitive rates for business owners. But it may be harder to qualify for an SBA loan than other types of loans due to the stricter eligibility requirements.
The Huntington National Bank is an SBA Preferred Lender with some of the highest number of approvals for SBA loans in the nation. It offers the SBA 7(a), 504 and Express loans, which can be used to purchase a new business. And as a preferred SBA lender, it can help push your application through faster.
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Pros
- Specialists to help with your application
- May offer faster turnaround times than non-SBA lenders
- High number of approvals compared to other lenders
Cons
- No SBA Microloans
- Mixed customer reviews
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| Loan amount | $5,000 – $10,000,000 |
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| APR | Varies |
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| Loan term | Up to 300 months |
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| Requirements | Meet the SBA requirements for a government-backed loan |
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| Loan amount | $5,000 – $10,000,000 |
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| APR | Varies |
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Best startup loan: Taycor Financial
Taycor Financial offers a range of loan products and may appeal to startups, as there is no time in business requirement for its equipment financing. And its working capital financing options require just three months in business.
It offers funds for purchasing equipment, machinery, vehicles, furniture and software, which can be essential for a new business. Its eligibility requirements are more relaxed than some lenders, requiring just a credit score in the mid-500s to qualify for some types of financing.
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Pros
- Low-doc application process
- Relaxed eligibility requirements
- Offers higher amounts than some other lenders
Cons
- Mixed reviews online
- Liens are placed on equipment
- Origination fees may apply
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| Loan amount | $400,000+ |
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| APR | Varies |
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| Requirements | Have been in business for less than two years |
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| Loan amount | $400,000+ |
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| APR | Varies |
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Best equipment loan: National Funding
National Funding business loans
4.6
★★★★★
Finder score
If you need equipment for a new business, you could borrow up to $150,000 with National Funding. It's a direct lender that offers a streamlined online application and lending specialists to help you. If approved, you could get up to 100% of your equipment funded with $0 down.
The company also offers a lowest guaranteed payment promise on its equipment lease payments. If you find a lower payment elsewhere, it will give you $1,000 in cash. National Funding gets overwhelmingly positive customer reviews and offers early payment discounts to help you save.
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Pros
- Competitive rates
- Quick turnaround funding
- No down payment required
Cons
- Origination fee may apply
- Low maximum loan amount
- Rates not advertised
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| Loan amount | Up to $150,000 |
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| APR | 6% - 14% |
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| Min. Credit Score | 600 |
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| Requirements | 6 months in business and $250,000 in annual sales, business bank account |
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| Loan amount | Up to $150,000 |
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| APR | 6% - 14% |
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| Min. Credit Score | 600 |
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Best line of credit: American Express
American Express business loans
4.3
★★★★★
Finder score
The American Express Business Line of Credit offers funding from $2,000 to $250,000 with repayment terms of up to 18 months. With a line of credit, you only pay a fee on what you borrow, making this a more flexible financing solution than a term loan.
To qualify, you need a credit score of at least 660 and a minimum of one year in business. But unlike a lot of lenders, you only need to show $3,000 a month in revenue. But as a short-term financing option, it's best for business owners who can pay it back quickly.
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Pros
- Low monthly revenue requirement
- Only pay fees on what you borrow
- No prepayment penalty
Cons
- Rates not disclosed
- Poor customer reviews
- Short repayment terms
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| Loan amount | $2,000 to $250,000 |
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| APR | Not stated |
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| Min. Credit Score | 660 |
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| Loan term | Up to 18 months |
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| Requirements | 1+ year in business and $3,000 a month in revenue. |
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| Loan amount | $2,000 to $250,000 |
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| APR | Not stated |
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| Min. Credit Score | 660 |
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Methodology: How we chose these lenders
- Application process
- Credit score minimums
- Customer service reviews
- Eligibility requirements
- Extra features
- Fees
- Funding turnaround times
- Lender reputation
- Minimum and maximum loan amounts
- Products offered
- Rates
- Willingness to work with risky industries
We also search for lenders that cater to a range of needs, including those that work with bad credit and newer business owners.
How to compare business acquisition loans
- Eligibility requirements. Check the lender’s eligibility requirements for the type of loan you want to apply for. Long-term business loans and SBA loans tend to have tougher eligibility requirements than working capital loans and equipment loans.
- Repayment terms. Because term and SBA loans generally have the longest terms, they tend to accrue the most interest over time. However, this may be a fair tradeoff for having lower monthly payments over a longer repayment period.
- APRs. APRs on long-term business loans and SBA loans are generally lower than APRs on shorter-term loans. It’s always a good idea to compare multiple quotes from different lenders to ensure you’re getting the best deal.
- Origination and other fees. Depending on the lender and your credit profile, you may be charged an origination fee on your loan. Also, be aware of prepayment penalties, late fees and monthly administrative fees that may apply to your loan.
- Funding times. While you may get a term loan in a week or less from an online lender or bank, some SBA loans can take weeks to fund. If you need funds right away, other options may work better, including short-term business loans.
- Customer support options. Many lenders have loan officers who can answer your questions and support you throughout the application process. This can be especially important for loans that require extensive documentation.
- Customer reviews. Customer reviews on sites like Trustpilot and the Better Business Bureau (BBB) website are a good place to learn how previous customers have fared with a particular lender.
What is a business acquisition loan, and how does it work?
Business acquisition loans like term and SBA loans are structured term loans requiring fixed, monthly repayments. You could also use a short-term loan like a line of credit to finance a business — but these are typically more expensive.
Repayment periods on term business term loans usually range from three to 10 years, with SBA loans extending up to 25 years. Loans can be either secured or unsecured with collateral. Down payments of 10% to 20% are typically required on SBA loans and commercial real estate loans.
To qualify for a business acquisition loan, you generally need a credit score of 670 and up, at least two years in business and sufficient monthly or annual revenue. You may also have to provide a personal guarantee.
Pros and cons of business acquisition loans
Pros
- Repayments can be stretched out over a longer term
- Rates may be lower than for short-term loans
- May have certain tax advantages
Cons
- Pay more interest over the long run
- May be harder to qualify for than a short-term loan
- Best rates go to established business owners
- Typically take longer to fund than short-term loans
Types of business acquisition loans
These are the most common types of loans used to purchase a new or existing business.
| Term loan | $5,000 to $2 million | 3 to 10 years | Long-term growth and expansion |
| SBA | Up to $5 million | 10 to 25 years | Long-term growth and expansion |
| Equipment financing | Up to $5 million | 1 to 5 years | Buying equipment and machinery |
| Commercial real estate (CRE) loan | Up to $5 million | 5 to 20 years | For purchasing or developing new property |
| Line of credit | $1,000 to $500K | 1 to 2 years | Working capital needs |
How to qualify for a business acquisition loan
To qualify for a business acquisition loan, you’ll need to meet the lender’s credit score, time in business and annual revenue requirements. Also, be prepared to provide the following documents when applying for a business acquisition loan:
- Sales contract for the business purchase
- Financial statements for the business you want to buy
- Business plan and sales projections of the business you want to buy
- Proof of funds for a down payment, if required
- Proof of collateral, if required
How to apply for a business acquisition loan
Applying for a long-term business loan typically follows these four steps:
- Check your eligibility. This step involves checking your personal and business credit scores, tallying your revenue, verifying your time in business and determining if you have any collateral to pledge if you go with a secured loan.
- Gather your documentation. Required documents typically include bank statements, tax returns, financial statements and other documents. You may also need to provide a business plan and personal guarantee if you’re a newer business owner.
- Complete the application. Fill out the full application and upload the required documents or link to your financial accounts. Be sure to review the application for accuracy before submitting to avoid delays in processing.
- Wait for approval and funding. Depending on the type of loan you choose, approval and funding could take place within a week or less or up to several weeks. Online lenders tend to have faster processing times than banks.
Alternatives to a business acquisition loan
If you don’t qualify for a business acquisition loan because you don’t meet the lender’s revenue or time in business requirements or you’re a startup, consider these alternatives:
- Personal loan. You may be able to use a personal loan for business expenses. Personal loans aren’t dependent on your time in business or revenue, which could work well if you’re buying or starting your first business.
- Home equity loan or HELOC. If you have more than 20% equity in your home, you could borrow against it to secure funds for a new business venture. But if you can’t keep up with the payments, you could risk losing your home.
- Credit cards. A form of self-funding, credit cards can provide the capital you need to buy an existing business or to start one from scratch — but watch out for high rates.
- Investor financing. If you’re an entrepreneur, money from an angel investor can give you the cash you need to get your business off the ground. But you’ll have to give up equity in your company in return.
- Crowdfunding. Crowdfunding is a popular marketing tool and a good way to judge interest in your product or service. It can help you gain potential customers while you drum up funding for your business.
- Grants. Business grants are free money through federal and state government agencies, as well as private corporations. Since they’re free, many people compete for grants and they can take months to fund.
- Microloans from the SBA. These are smaller loans up to $50,000 from the SBA, which are typically backed by collateral and a personal guarantee.
Where to get a business acquisition loan
Business acquisition loans are available from traditional lenders like banks and credit unions, online lenders and business loan marketplaces like Lendio, Lendzi and Biz2Credit.
Banks and Credit Unions
Banks and credit unions are a good place to start a search for a business acquisition loan. These institutions tend to have the most competitive rates, especially if you’re an existing customer. To qualify, you’ll typically need a minimum credit score of around 700, two years in business and at least $100,000 in annual revenue.
Online Lenders
Online lenders tend to have more relaxed eligibility requirements than banks and credit unions and may offer faster processing times on term and SBA loans. Many online lenders also offer the SBA Express loan program, which typically offers faster turnaround times and funding than the SBA 7(a) and 504 loan programs.
Alternative lenders
Besides bank and online loans, there are other options for funding a new business acquisition. These include personal loans, home equity loans, venture capital and angel investor financing, crowdfunding or asking family and friends.
How to prequalify for a long-term business loan
Prequalification involves answering a series of questions about yourself and your business to determine your eligibility before you formally apply for a loan.
Here are the general steps:
- Visit the lender’s website and fill out the prequalification form.
- Provide information about yourself and your business.
- View your loan options and compare offers.
Once you’ve narrowed down your options based on your quotes, you can formally apply for a loan with the lender of your choice.
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Right now I have assets and I want to grow my business so I am kindly asking you if you can offer me a loan.
Hi Felix,
Thanks for getting in touch!
It’s good to know that you have assets and you’re wanting to grow your business! To know if you can be approved a loan. review the eligibility criteria of the loan before applying to increase your chances of approval. Read up on the terms and conditions and product disclosure statement and contact the bank should you need any clarifications about the policy.
Hope this was helpful. Don’t hesitate to message us back if you have more questions.
Best,
Nikki