How to Get a Loan to Buy an Existing Business

In many ways, getting a loan to buy an established business is easier than getting a business startup loan. As long as it’s turning a profit, the business’ success is already proven, after all. Lindsay VanSomeren is a personal finance writer based out of Kirkland, Washington. Her work has appeared on Business Insider, Credit Karma, LendingTree, and more. Best Small Business Loans We researched more than 60 online and traditional lenders to come up with our list... Best Fast and Easy Business Loans in 2023 Get funding for your business today or tomorrow with these fast, simple business lenders.
You could fund your business using a secured or unsecured business loan. If you choose the guaranteed business loan route, you’ll have to offer security in the form of an asset. Security provides the lender with more confidence that they will get their money back because if your business doesn’t repay, the asset is used to recoup the losses.

Bank of America’s Preferred Rewards program can offer interest rate discounts and other perks. Bill Frost has been a writer, editor, journalist, and occasional graphic designer since the grunge-tastic ’90s. When not cranking out quips, Bill actualizes can you get a loan to purchase a business beer money as a musician and podcaster. We've overviewed the main types of loans—now let's look at a few more details. She recently compared the price of four new name-brand tires at Costco with the price offered by a retail tire chain.

Compare how much you’re likely to pay up front and over the life of each loan you consider. Some lenders may charge higher borrowing costs than you’d get with standard business term loans as these loans cater to newer businesses and pose an elevated risk to lenders. Despite the SBA’s intention to provide small business owners with the funding they need, SBA loans come with an application process that’s challenging to navigate. Plus, it could be several months before the loan proceeds are disbursed to you.
If your business provides a product or service to other businesses and uses invoices to collect payments, it might be eligible for invoice factoring. With this type of financing your business sells its outstanding B2B invoices to a third party. Eligible businesses may be able to borrow up to $50,000, typically from nonprofit organizations.

Withinvoice factoring, you submit your customers’ invoices to your lender, which then collects the payments from your customers. It’s typically best for companies that generate invoices to other businesses and are in need of quick funding with flexible qualification requirements. A business owner should have a personal FICO Score of at least 500 to qualify for a bad credit business loan. That said, even a FICO Score under 670 is considered fair or poor, and likely won’t qualify a business owner for the most competitive interest rates available. Business owners who apply directly through Kiva’s website may receive Business owners who apply directly through Kiva’s website may receive 0% interest. There are many potential lenders and options on the market today that provide funding for business purchases.
You need to make sure you meet all the qualifications for a construction loan and will be able to refinance later since it's a short-term loan. Especially if you’re borrowing informally , do what professional lenders do—get a title search. Find out whether there are any liens or other issues with the property before you hand over money. If you’re going to buy land without plans to build a home or business structure on the land, getting a loan will be more difficult.
Refinance calculator Decide if mortgage refinancing is right for you.Loading... Veteran Home Loan Center Discover the benefits you have as a Veteran. If a business encounters a promising opportunity, a small business loan can enable them to take advantage of it. When starting a business, a loan may be necessary to cover initial expenses such as rent, equipment, inventory and employee wages. You can use crowdfunding platforms like Kickstarter or Kiva to find interested parties. You usually reward your small business investors with perks like your product, swag or equity, depending on the level of investment.

Their microloans currently come with a 0% interest rate, and you can borrow up to $15,000. Loan amounts from Kabbage vary depending on the type of loan you apply for. Kabbage also offers business lines of credit up to $150,000 and online loans in amounts from $500 to $150,000. Instead, they have programs in place that make it less risky for participating lenders to make a loan.
Asking friends and family to invest in your business is a tried-and-true strategy for securing business funding. You may be able to connect with angel investors and venture capitalists through your local business incubator or startup accelerator. An online search for your city or region and "business incubator" should lead you to any such organizations in your region. Equity financing gives individuals or firms a share of ownership in your business in exchange for the capital they provide to you. You borrow money and promise to pay it back with interest, regardless of how successful your business becomes. Coming up with an exact value for your business isn’t possible without putting it up for sale, but keeping solid financial records will make buyouts easier.

ROBS can be risky and may require substantial fees, so you’ll want to think carefully before choosing this option. However, not all franchisors provide funding, and available options will vary by company. You can check a franchisor’s website to see if it offers financing for franchisees or reach out to the brand directly for more information.
The 7 loan program is the SBA’s flagship program that offers loans up to $5 million for a wide range of uses. However, with an SBA  loan, they may only require as little as 10%. This is known as an equity injection and is required for changes in ownership transactions. The MicroLoan program can be a great option if you are starting or expanding an existing business.
Have a local contract lawyer review the terms and discuss them with you to ensure you have a thorough understanding of your loan terms so you can make an informed decision. Remember that treasure trove of documents you gathered in Step 5? You should already be prepared to attach all of the required documentation to your loan application for streamlined application submission. At this point, you have determined this business is a good fit for you, and you’ve assessed how much you’ll need to make the purchase. You’ve also established a clear and documented understanding of the business’s current condition and a plan on where you can take it.

Evaluate the total cost of borrowing before committing to a loan. Although online applications are available for business loans up to $100,000, you must apply in person for loans over that amount. But you can find lenders that offer loans for businesses with at least $33,000 to $50,000 in revenue. The lender may still be willing to work with you if you don't quite meet the revenue requirement but have other signs of good financial health. Gather your most recent personal and business bank statements, tax returns, business license and incorporation documents . The lender may not require all of these documents, but it doesn’t hurt to have them available if needed.