Want to buy a business? Here's how to get a business acquisition loan

How to fund the purchase of a small business

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Find out how to achieve your small business dreams by buying an established business.

Running your own small business is an appealing idea if you have the ingenuity and know-how, but it can take a lot of money to get it up and running. When financing, you have to convince a lender that you know how to manage a business and that you’ll be making a profit. There are different terms and conditions to be aware of — but also many options and tricks to help you get a better loan.
LoanBuilder, A PayPal Service Business Loans

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Customizable business loans with no hidden fees.

  • Min. Amount: $5,000
  • Max. Amount: $500,000
  • One-time fixed fee charged over the life of the loan
  • Acclaimed customer service
  • Requirements: $100,000+ annual revenue, 1+ years in business, 600+ personal credit score

    What loans can I use to buy a new business?

    When you’re ready to make an investment into your future and buy a new business, you can use one or more of these loans to finance your purchase.

    LoanHow it worksWhere can you get it
    Business term loansBorrow a lump sum that you repay over a fixed period of time with interest and fees.Banks, credit unions, online lenders
    SBA loan programsSimilar to a term loan, but part of the loan is backed by the Small Business Administration, resulting in lower interest rates.Banks, credit unions, online lenders
    Vendor financingBuy a business directly from the seller with a loan built into the terms of the sale. Repayments are often a percentage of the business’s future profits, though terms and conditions vary depending on what you negotiate with the seller.Small business sellers
    Rollover for business startups (ROBS)If you have over $50,000 in a 401(k), IRA account or other retirement account, you can invest a portion of your funds into a new business without having to pay extra taxes or early withdrawal fees.Your retirement account
    Secured loansTake out a term loan using assets of the business you’re going to buy — like equipment and real estate — as collateral.Banks, credit unions, online lenders
    Home equity loans and lines of creditBorrow against your home’s value to get financing for your new business. Home equity loans and lines of credit are usually tax-deductible and may have longer terms than your average personal or business loan.Banks, credit unions

    Compare loans you can use to purchase a business

    Rates last updated September 21st, 2018
    Unfortunately, none of the business loan providers currently offer loans for these criteria.
    Name Product Product Description Min Loan Amount Max. Loan Amount Requirements
    LoanBuilder, A PayPal Service Business Loans
    Customizable loans with no origination fee for business owners in a hurry.
    $5,000
    $500,000
    Annual business revenue of at least $42,000, at least 9 months in business, personal credit score of 550+.
    Lendio Business Loan Marketplace
    Submit one simple application to potentially get offers from a network of over 75 legit business lenders.
    $500
    $5,000,000
    Must operate a business in the US or Canada, have a business bank account and have a personal credit score of 560+.
    OnDeck Small Business Loans
    A leading online business lender offering flexible financing at competitive fixed rates.
    $5,000
    $500,000
    Must have been in business for at least one year with annual revenue of $100K+. Must have a personal credit score of 500+.
    Lending Express Business Loan Marketplace
    $5,000
    $500,000
    At least 3 months in business and $10,000+ in monthly revenue. Your business might also qualify if it's been in business at least 6 months with $3,000+ in monthly revenue.
    Fora Financial Business Loans
    No minimum credit score requirement and early repayment discounts for qualifying borrowers.
    $5,000
    $500,000
    Business age 6+ months. Monthly revenue $12,000+. No open bankruptcies.
    LendingClub Business Loans
    With loan terms that vary from 1 to 5 years, enjoy fixed monthly payments and no prepayment penalties through this award-winning lender.
    $5,000
    $300,000
    2+ years in business; $50,000+ in yearly sales; No bankruptcies or tax liens; At least 20% ownership of your business; Fair or better personal credit
    LendingTree Business Loans
    Multiple business financing options in one place including: small business loans, lines of credit, SBA loans, equipment financing and more.
    Varies by lender and type of financing
    Varies by lender and type of financing
    Varies by lender, but you many require good personal credit, a minimum business age and minimum annual revenue.
    National Business Capital Business Loans
    Get a large business loan to cover your financing needs, no matter what the purpose is. Startups welcome with 680+ credit score.
    $10,000
    $5,000,000
    Your company must have been in business for at least 6 months and have an annual revenue of at least $180,000.
    Kabbage Small Business Line of Credit
    A simple, convenient online application could securely get the funds you need to grow your business.
    $500
    $250,000
    Must have been in business for at least 1 year. Revenue minimum is $50,000 annually or $4,200 per month over the last 3 months.

    Compare up to 4 providers

    How to get a loan to buy a small business

    When you want to get a company off the ground, you have two choices: start fresh or buy an existing business. Buying a small business is usually more cost-effective, but you may face the same problems that made the original owner sell, like poor location, outdated equipment or a lack of customers.

    There are three main factors to consider before you even start to look for a lender:

    1. Determine how much money you’ll need. Borrowing too much means you’re paying more in interest than you need to. Borrowing too little means you won’t have enough and may need to attempt a second loan, likely at worse rates. Make sure your estimate is as accurate as possible.
    2. Have a solid business plan. Your plan should clearly show how the business will manage expenditures and income to remain profitable. It should also outline how long it will take to pay off the loan.
    3. Consider your repayment timeline. Determine how long it will take you to pay back the loan and how much you’ll be able to afford to repay per month?. Will it be a consistent amount or can you pay back more as the business grows?

    There are many different types of business loans, and it’s important to know your options before starting an application or putting together a business plan.

    How can I get approved for a startup loan?

    If the business you’re purchasing has been operating for less than a year, the lender will likely consider it a startup. The main obstacle between you and a loan is your ability to convince a lender that you can buy a small business and grow its revenue within a reasonable amount of time.

    • Consider how profitable it will be in concrete dollar values and draw on as much evidence as possible. You must have financial projections to convince the lender that the business will be profitable.
    • Having relevant small business management and financial experience may sway potential lenders. Don’t hesitate to mention that your own business history can help you succeed.
    • Break down exactly how you plan on spending the money. If the money will go towards staff or refurbishment costs, a lender might expect a slower return on investment. Money pushed towards inventory and marketing might mean a quicker return.

    Rather than applying for loans everywhere with a low success rate, your time is better spent honing in on a small number of good lenders whose eligibility criteria you meet. Before you can do this, you need to compare business loans to rule out any you don’t qualify for.

    Compare business lenders offering startup loans

    6 more ways to finance business acquisition

    Getting a loan can be challenging, but an applicant with motivation and a good business plan has no shortage of options. Here are six more ways to get money to buy a business.

    1. Venture capitalists

    These investors are groups or individuals that aggressively look for big returns on investment and have a particular interest in new startups. They typically offer money in exchange for equity or a share of the company ownership.

    When the company grows and succeeds, this equity multiplies in value, making it a high-risk, high-return strategy for venture capitalists. To attract venture capitalists, you should have a plan for enormous, potentially global, business growth.

    2. Angel investors

    A more specific type of venture capitalist, angel investors are usually individuals rather than groups. They too want to acquire equity, but usually take a more active role in the success of the company and offer money as well as advice, experience, connections and other priceless intangible assets.

    3. Government grants

    The majority of small business assistance from the government comes in the form of free or inexpensive advisory and guidance services. There are also small business grants that offer funds to businesses that meet certain requirements. See how business grants compare to business loans and which might be better for you.

    4. Crowdfunding

    Crowdfunding involves setting up an online campaign to raise small amounts of money from the public. This can be a good litmus test of whether or not the general public is ready to believe in your business.

    Your success here is largely down to luck and the size of your social network, but your odds improve by being skilled in marketing. Being able to offer your supporters gifts, freebies and having a promising, well thought-out business plan also help.

    5. Family and friends

    The terms, conditions and benefits you get from these loans depend on how much money your friends and family have and how much they are willing to invest in you. Many successful enterprises got their start with loans from family and friends, and this option shouldn’t be disregarded. Keep everything official and professional by keeping a written record of any deals made.

    6. Your own savings

    If you believe in your business plan, then this is a good place to start. Keep loans down by using as much of your own personal savings as you feel comfortable with. Some lenders, particularly angel investors and venture capitalists, will regard this highly and be more likely to invest in your business if you have this kind of personal stake in its success.

    Bottom line

    Buying a business can be a stressful time, especially when you’re searching for ways to make it affordable. By seeking out the right loans and investors, you can make your dreams a reality. Just be sure to compare terms and have a strong business plan before signing on the dotted line. Otherwise, it’s your savings and credit on the line.

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