Business Acquisition Financing

Written by James McNee
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The dream of buying a business is a proposition made possible through business acquisition financing. Expert insight and guidance may be necessary to achieve a customized solution. Requirements vary based upon the size of the transaction. Funding is available for purchasing a new business and for expanding an existing business.

Requirements for Business Acquisition Financing

Acquisition loans are granted to qualified applicants. Lenders are careful about approvals since this type of loan is often considered unsecured. Typically, a buyer will be required to make a down payment of 15 to 30 percent of the acquisition price. Certain factors may increase or decrease the down payment requirement. Experience in the industry is helpful. If the seller provides partial financing, support, and training, approval is more likely.

Typically, business acquisition financing is granted with a term of 25 years when the purchase includes real estate. Terms are shorter when real estate is not included. The source of the down payment may be personal equity or equity in an existing business. Venture capitalists have become increasingly involved in financing independent businesses. While outside investors are valuable, they often want majority control.

Lenders can offer expert advice about available business acquisition financing options. Some lenders have been given Preferred Financial status by the Small Business Administration. They offer SBA loans with favorable terms to qualified buyers. Longer amortization periods and up to 70 percent financing are available, often with a minimum of paperwork.

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