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The Top 5 Loans to Finance Your Business Acquisition
Looking for the right type of loan to finance your business acquisition? There are a lot of options. Click here to learn a few of the best.
Finance your business acquisition
Here are top 5 loans to learn about
Looking for the right type of loan to finance your business acquisition? There are a lot of options. Read on to learn a few of the best.
Finance your business acquisition
A record $2.5 trillion in mergers was announced in the first half of 2018.
If you are looking to acquire a business, there may not be a better time.
The acquisition gives you access to experts, capital, and market power that can grow your enterprise and build your brand. Yet you may be wondering how you can make it happen.
There are a number of ways to finance your business acquisition. Here are five of the best loan options.
1. Small Business Administration Loans
Small Business Administration (SBA) loans are known for their competitive interest rates and long repayment plans. The SBA does not loan money directly. Instead, they partner with select banks and lenders to secure loans to business owners.
It is easier to get approved for SBA financing if you are an established business rather than a startup. This is because the lender can use your existing repayment history to prove your credibility.
It may take longer to qualify for an SBA loan than other loans. In addition, you will likely be required to provide a down-payment of at least 10%.
Interest rates on SBA loans vary depending upon the current U.S. prime rate. A repayment schedule will vary depending upon the type of business you are purchasing. It is shorter for working capital and longer for real estate.
2. Startup Loans
If you are a new business owner hoping to finance your business acquisition, a startup loan may be best for you.
These loans may be easier for new business owners to qualify for, but you will still need a solid business plan and a good credit history. One downside of startup loans is that they can restrict cash flow. And don't forget that you could be putting your own credit reputation at risk if the business doesn't work out.
3. Rollover for Business Startups
Rollovers for Business Startups (ROBS) allow you to access the money from your retirement to start a business without paying taxes or early withdrawal fees. The funds can be used for acquisition, working capital, or as a down-payment for other forms of financing.
A ROBS is not a loan, so there will be no debt to repay. It is also quicker to acquire than a typical business loan.
A ROBS usually requires a setup fee and a small monthly management fee. The biggest obvious drawback is that you will risk your retirement funds.
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4. Home Equity Line of Credit
A Home Equity Line of Credit (HELOC) is a line of credit secured by the equity you have in your house or apartment. You will likely need at least 20% equity in your home.
A HELOC can be a more inexpensive way to access your credit than other methods because they offer interest-only payments for the first few years of repayment. The downside is that you are risking your home if your investment does not work out.
5. Term Loans
A term loan offers a lump sum that can get repaid in fixed installments for a predetermined period of time. Generally, they are quicker to acquire than an SBA. You may, however, get held personally liable if your business stops making payments.
The Best Way to Finance Your Business Acquisition
The best loans to finance your business acquisition will depend on your experience, credit history, and type of business.
For more information on business acquisition options, read our blog today.
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BUSINESS ACQUISITION
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THE BIZNEXUS ROUNDUP
Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.
Please, Sell My Business! How to Sell a Business You Don't Want
If you're new to the process of selling a business, you may not know the best way to sell your business for maximum profit. Realistically, your business is worth as much as it will sell on the marketplace.
Sell My Business
How to Sell a Business You Don’t Want?
Are you saying "Please, sell my business!"? Read this article to learn how to sell a business you don't want and get the most money possible.
Sell my business
You’ve spent blood, sweat, and tears into building your business and now you’re keen to sell it. As with any sale, your goal is to find the right buyer and to sell your business for maximum value.
But if you’re new to the process of selling a business, you may not know the best way to sell your business for maximum profit. Don’t worry, every new business owner has been there.
If you’re thinking ‘I want to sell my business’ then we’re here to help you. Here are our tips on selling a business to gain the best profit.
Determine What Your Business Is Worth
When selling your business, you first need to determine how much it’s worth before putting it on the market. Realistically, your business is worth as much as it will sell on the marketplace. But deciding on that price can be tricky.
Thankfully, there are various business valuation methods out there to help you. These differ from asset-based to future earnings approaches. However, to get the best results you should use more than one method.
The current market, economic trends, and what other similar companies have sold for recently also need to be considered.
Getting a professional business valuation is a must-do. While legally anyone can conduct a business valuation, a company valuation performed by a professional will be viewed more favorably by potential purchasers. What’s more, potential buyers are likely to request a professional business valuation before committing to purchase so this can save you time later.
Be Clear About What You're Selling
When making a business sale, you need to decide exactly what the assets of the company are and decide what you’re happy to sell. Consider which physical assets you’re selling and what other assets you have available to sell.
Selling a business often includes assets like goodwill, trademarks, client lists, as well as physical assets.
The value of such assets will depend on their quality. If your company is incorporated, you must also consider whether you’re going to sell the business as an asset sale. This is where you sell everything in the corporation, apart from the incorporated company itself.
Alternatively, you can go for a share sale. This is where you sell everything, including your incorporated company.
I Want to Sell My Business: Getting Professional Help
When you’re thinking ‘I want to sell my business, one of the best ways to help with the process is to seek out professional help.
Here at Biznexus, we can help. We help match business owners with the best business intermediaries to help you sell your company for the most profit, on optimal terms. The service is free for business owners, and our goal is to help increase entrepreneurs’ chances of having a positive experience of selling their business. To learn more about how we can help, check out our website.
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PREPARING TO EXIT YOUR COMPANY
Have you checked out our podcast?
THE BIZNEXUS ROUNDUP
Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.
The Pros and Cons of Buying an Existing Business
Are you thinking about buying a business? Learn about the pros and cons of buying an existing business here.
Buying an Existing Business
Here are the Pros and Cons
Are you thinking about buying a business? Learn about the pros and cons of buying an existing business before you move forward.
Buying existing businesses
A record number of businesses were sold in 2019. That number continues to trend upward from previous years as baby boomers seek to retire and millennials begin to realize there might be limited exit options for their would-be unicorns in a public market focused on profit….
The economy is still doing well. Most businesses that sell are financially healthy, with cash flow to pay off the acquisition price.
While buying an existing business definitely has its advantages, there are also a few downsides anyone looking to buy should be aware of. The more you understand the nuances of buying an existing business, the more successful you'll be.
We want to help you understand the pros and cons of purchasing an existing business. Keep reading to learn more.
Advantages of Buying an Existing Business
It's not easy to start your own business. Statistically speaking, most startup businesses shut their doors within five years.
Which makes buying an already established business that's proven to be financially successful a smart move. The hard work has already taken place to get past liftoff and into the atmosphere of profitability.
Access to a Network of People
When you buy an existing business, you get access to an existing network of people who can help guide you and your business including:
Loyal customers
Vendors
Suppliers
Employees
Also, if the existing owner has established relationships with banks, printers, advertisers, and insurance companies, it's much easier than trying to embark on those relationships from scratch.
Established Brand
Branding is an essential part of marketing. Without loyal customers, there is no viable business.
Buying a small business with a well-established brand name makes it easier for you to reach out to attract new business.
Fewer Financial Surprises
There's a lot of risks a new business owner takes. But when the seller already has everything in place, that means the business is already operating and pricing has already been established.
There's less of a chance you'll get caught in a money pit because the seller should already have provided you with the financial documents.
Also, the sale is structured so you can cover all your expenses including the debt service and your salary.
The Disadvantages of Buying an Established Business
While the business may already be well-established, that doesn't mean a few changes may be necessary. It's also difficult to fully comprehend what changes are needed until you've already purchased the business.
However, here are a few red flags to look out for:
High employee turnover
Outdated or unreliable equipment
Unreliable suppliers
A business that carries existing debt or has cash flow issues also will mean there's hard work ahead of you to get back into the black. And it's not always easy to walk into an already established business and try to change the rules.
The Brand May Be Established But Suffer from PR Issues
While it's great to buy a business with an already established brand name, if the company suffers from PR (public relations) issues, you're inheriting a potential disaster that is now your job to clean up.
Even a new owner may not be enough to change the minds of unhappy former patrons. Make sure you buy a business with a positive reputation.
A Cheap Business Isn't Necessarily a Good Thing
If a business seems inexpensive it's usually not a good thing. An expensive business means it's doing financially well and has a good reputation.
A cheap business may mean it has a bad reputation or a good or service isn't performing well in the market. Always ask yourself if it's worth the money and the work you'll need to put in to ensure a company stays successful after you've bought it.
Start Getting Matched With Acquisitions and Make Some Inquiries
The best way to get going on buying your first business is to start looking at opportunities and reach out to connect with the seller or the seller’s business broker if you’re serious about any specific opportunity. As a buyer, at no cost to you, you can set up your profile and acquisition preferences today on BizNexus and we’ll start showing you opportunities from our $1 billioin+ inventory platform that makes sense for you.
BizNexus -Learn More From Our YouTube Playlist:
BUSINESS ACQUISITION
Have you checked out our podcast?
THE BIZNEXUS ROUNDUP
Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.