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Business Acquisition Loans

Purchasing an existing business can be an excellent strategy for growing your company. It can allow your company to expand geographically, offer new or complementary lines of products and services, acquire new customers, and increase market share. Business acquisition may also allow individuals to achieve employment independence.

In most cases the SBA Guaranteed Loan Program may be the best financing vehicle for acquiring a small- to medium-size business. An SBA loan can finance up to 70% of the total "project cost" of acquiring a business. For an existing business with seasoned management and a strong financial position it is possible to finance a higher percentage of the project. Other factors that may affect the amount of owner injection include the type of assets being acquired, whether the seller will carry some of the financing, or if the business being acquired is a proven franchise. The owner's injection can be in the form of cash, investment or financing by an independent third party (lender, friend, or family member).

SBA loan proceeds cannot be used to finance intangible assets such as goodwill. However, the SBA allows the use of the owner's injection to pay for intangible assets.

Business acquisitions typically require a variety of loan purposes, such as inventory, equipment, working capital, and commercial real estate. In most cases we can structure multiple uses of loan proceeds into a single business acquisition loan.

Under the SBA guidelines the term for business acquisition loans is up to 10 years. However, depending on the type of business and assets being purchased, the term can be significantly longer. For instance, if the business assets being purchased include commercial real estate, the term can be over 20 years. In the event the assets being acquired consist of mostly inventory and equipment, then a term up to 10 years may be appropriate.

Repayment ability from the cash flow of the business is a primary consideration in the SBA loan decision process; but good character, management capability, collateral, and owner's equity contributions are also important considerations.

Conventional financing may also be a viable option for funding your business acquisition project. We can help you understand your options, and structure a financing package for your project.

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