There are a variety of business acquisition financing strategies and the most suitable one will depend on your financial situation, business goals and the type of company you are purchasing. It is essential to compare the loan terms, including the minimum credit score and annual revenue requirements for each lender. It is important to consult an expert financial advisor with expertise in this field to ensure that your financing arrangement is in line with your acquisition strategy.
The most well-known method to finance an acquisition is with a traditional loan. This includes loans from commercial banks as well as those that are backed by the Small Business Administration (SBA). These loans require a solid business plan and a solid credit score. They aren’t easy to obtain for businesses that are less than two years older.
Private lenders may be an alternative to bank financing, particularly if the business requires a large down payment or has special business needs. These lenders are focused less on the assets of a company and more on its cash flow.
Seller financing is a different way to finance a business acquisition. This is usually limited to a few percentages of the total purchase cost and can be used to cover the initial costs or some of the owner’s salary. Buyers can also negotiate seller financing to help close the deal and to reduce their reliance on bank financing following the sale.
