A Guide to Securing the Best Small Business Acquisition Loan

Want to acquire a small business but need help with capital? You’re not alone. Most entrepreneurs who want to acquire a small business are in the same boat.

Securing the best small business acquisition loan requires planning, research, and preparation. In this post, we’ll guide you through it step by step — from deciding to applying. So let’s dig in!

What a small business acquisition loan is

A small business acquisition loan provides funds needed to purchase an existing business. It can cover buying the business as well as other needs — including working capital, renovations, and upgrades. It can be obtained from lenders such as banks, credit unions, online lenders, and non-bank SBA lenders. Financing with the seller is sometimes an option, too.

Step 1: Determine your financing needs

Determining how much financing you’ll need will influence what kind of business acquisition loan you go with. Take into consideration the purchase price of the business, working capital requirements, and any necessary renovations or upgrades. Is there another cost you’ve identified? Factor that in, too.

Step 2: Research your financing options

Now that you know your financing needs, you can find the best financing solution. There are many ways to fund a small business acquisition, and here are the options people usually go with:

Bank or credit union loans 

Banks and credit unions offer a range of loan products, including term loans and lines of credit. With the right amount and terms, a traditional loan from a bank or credit union can work for your small business acquisition.

The amount you can borrow usually depends on the institution — and you’ll likely need a good credit score. Also, brace yourself for a lot of waiting and paperwork if you go this route.

Seller financing

Sometimes the seller of a business is willing to provide you with a financing option themselves. This can be a good choice if you don’t qualify for a traditional loan. 

In this situation, the buyer usually makes monthly payments until the sale price is covered. It also keeps the seller involved in the business longer, which can have certain benefits.

SBA 7(a) loans

The Small Business Administration offers a variety of loan programs to help you acquire a small business — the most popular being the SBA 7(a) loan, which provides up to $5 million in financing.  
On top of that, the rates and terms of the SBA 7(a) loan are usually better than other loans. Plus, it’s not dependent on collateral and won’t be reflected on your personal credit report. 
One caveat is that you’ll have to exhaust other funding options before applying for this loan. For more info, see our blog post on qualifying for an SBA 7(a) loan.

Step 3: Check your credit score and financial history

It may seem obvious, but it’s important enough to call out: lenders will consider your credit score and financial history when evaluating your loan application. That’s why before applying, you should review your credit report and address any errors or issues. A solid financial history helps demonstrate your ability to repay.

Step 4: Gather your documents

A lender will usually indicate up front what documents they’ll need for your application. You can count on them requesting your financial statements, tax returns, and business plan at minimum. 
Gather all necessary documents before applying to ensure the process is as smooth and timely as possible.

Step 5: Review your loan options and decide on the best one

Review each loan you’re considering carefully. Consider interest rates, repayment terms, fees, and penalties. Ensure you understand all the terms and conditions of the loan you’re going to apply for. 
There’s one more important factor to consider before deciding on a loan: customer service.

Excellent customer service is a must

Take a look at reviews, testimonials, and anything else you can find about your potential lender’s customer service record. You’ll want to see that they’re responsive, knowledgeable, and transparent — and can help you navigate the loan process with ease.  
This can make a significant difference in the success of your business acquisition financing — and the overall success of your business. Make this a critical factor when deciding which loan to apply for.

Step 6: Apply for the loan

Once you’ve done all of the above, it’s time to apply for your business acquisition loan. At this point, you’ve done your research and will submit your application to the lender that offers the best rate and terms.

Fund-Ex Solutions Group is here for you

By following the steps above, you’ll increase your chances of completing a successful small business acquisition. 
If you decide that an SBA 7(a) loan is right for you, we’d love to help. We’re a non-bank lender who makes the process quick and easy. Our combined experience spans decades — and we provide excellent customer service every step of the way. Contact us to get started.

Recent Blog Posts

A Guide to Securing the Best Small Business Acquisition Loan

Are you an entrepreneur looking to acquire a small business but lack the necessary capital? If so, you’re not alone. Fortunately, there are various small business acquisition loan options available, including SBA business acquisition loans, bank or credit union loans, seller financing, and more. To secure the best loan for your needs, it’s essential to determine your financing requirements, research your options, check your credit score and financial history, gather the necessary documents, review your loan options, and consider customer service. By following these steps, you’ll increase your chances of success in acquiring a small business.


SBA 504 Loan or SBA 7(a) Loan: Which is Right for You?

Small business owners (and aspiring ones) are often attracted to SBA loans due to their lower interest rates and longer terms. However, it’s not always clear which SBA loan is the way to go: an SBA 504 loan or an SBA 7(a) loan?