Seven Steps for a Business Acquisition Loan

1. Seven Steps for Business Acquisition Loan Success Business Acquisition Loans

2. Overview Looking to acquire a business? A business acquisition loan could be your key to success. Learn the seven essential steps to secure financing, including preparing your application, researching loan options, and understanding loan terms. Be ready to make the winning offer and choose the best financing to grow your business. Click Here to Discover the steps to business acquisition loan success today with Biz2Credit!

3. What to Know About Small Business Acquisition Financing Borrowers can use small business acquisition loans for various needs, such as covering startup costs, buying commercial real estate, or buying a franchise. Be sure to shop around with various SBA lenders and credit unions for your business loan, to get the most competitive rates and check your eligibility. Beth Goldberg, Director of the New York District SBA Office, said that besides the seven points below, entrepreneurs should put themselves in a lender’s shoes whenever they consider applying for a small business loan.

4. Seven Steps for a Business Acquisition Loan To find success in securing loans to purchase a business, borrowers should have the following: 1. Letter of Intent When seeking a loan to fund a business acquisition, having a signed letter of intent to purchase is a requirement for just about any small business lender. The letter should outline the terms of the deal and include a contingency clause explaining that the purchase is contingent on the buyer’s ability to secure the funding required to buy the business.

5. 2. A Strong Personal Credit History Typically, to secure a small business loan, lenders will look for an individual owner (or partnership members if the business has multiple owners) to have credit scores of 650 or above. Naturally, the higher the credit score, the better the potential borrower's chance of securing financing. Those with personal credit scores in the 750-850 range stand a good chance of getting a loan and are usually able to do so at a more attractive interest rate than someone with a lower credit score. It’s a simple law of economics for the lender: the higher the risk, the higher the reward (in the form of increased interest rates charged). 3. Personal Financial Statement The personal financial statement provides financial information about the borrower(s) intending to acquire the business. In partnerships, everyone with 20% equity or more will be a loan guarantor, meaning all shareholders must provide this documentation.

6. 4. Two to Three years of Tax Returns Lenders want to know that you’ve been staying on top of all your obligations. When you apply for a loan, lenders typically ask you to produce your recent tax history. To be on the safe side, be ready to have three years’ worth of personal tax returns to show your lender. Borrowers with existing businesses should be prepared to provide returns filed by those companies. 5. Financial Statements from the Acquired Business Most lenders want to see the company’s annual revenues and three years’ worth of financial documents – profit & loss statements, balance sheets, and cash flow statements – from the company borrowers seek to acquire. Lenders will use these documents and disclosures to assess the viability of the business borrowers seek to acquire. 

7. Remember, their main concern is whether or not borrowers will repay the loan. If the target company has lost money for the past three years, securing the financing to purchase it will be much more challenging. Borrowers should be ready to explain in detail how they will turn the business around. 6. Investing Your Own Resources In The Business Lenders want to make sure that borrowers are serious about the business before they approve a loan to buy a business. One way to prove it is by investing your own money into the venture. After all, if you’re running the business and aren’t willing to put up your own money, why would a lender want to? Some banks will look for a minimum owner contribution of 10 percent as a down payment. Others prefer 20 percent. A higher percentage is an indication that you are willing to put “skin in the game” and conveys that you are committed to making the business succeed.

8. 7. Business Plan A well-written business plan can make the difference between lenders approving or denying the loan. It should include: Executive Summary (keep to one or two pages) Business Description Description of the Local Market and Competitive Landscape Product or Service Details Sales and Marketing Read more: https://www.biz2credit.com/revenue-based-financing/steps-business-acquisition-loan-success

9. Eligibility Criteria

10. Why Choose Biz2Credit? • Trusted partner for franchise funding • Biz2Credit was founded in 2007 and has provided more than $10 billion in loans. • Dedicated support team • Tailored financing solutions

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