Business Acquisition Funding

Written by Jill Morrison
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There are several options available for business acquisition funding. Those planning to buy a business must consult with experts to determine the correct strategy for their situation. There are an increasing number of prospective buyers in the marketplace looking for financing sources to acquire a new business or to expand an existing business. Funding is available to help them achieve their goals.

Types of Business Acquisition Funding

In some cases, sellers are willing to finance the sale of their business. They might offer more flexible terms than lending institutions. Typically, they will finance only 30 to 50 percent of the purchase price with the balance needing to be funded by other lenders. In fact, traditional lenders are more likely to approve a loan for a business that includes partial seller financing.

Lenders will usually finance 50 to 75 percent of real estate value and 75 to 90 percent of new equipment value when they approve business acquisition funding. It is helpful to have substantial net worth, liquid assets, or a reliable source of income since this is considered an unsecured loan. The typical term would be 25 years if the acquisition includes real estate. Otherwise, the term may be 10 years.

The Small Business Administration offers business acquisition funding with favorable terms of 10 years and up to 70 percent financing. The buyer must prove that the business is stable with adequate cash flow and there must be collateral offered. SBA offers a Lo-Doc program with minimum paperwork for loans under $100,000. Some lenders have been designated as Preferred Financial and are recommended by the Small Business Administration.

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