Obtaining a Business Acquisition Loan

A business acquisition loan (or business acquisition financing) is a loan used to buy a

business. A business buyer can also be a business owner who wants to merge with another business or who wants to diversify their core business. Different lenders specialize in different types of business acquisition loans, but there are some common rules and steps in all the processes.

Step 1 - Find an Institution That Makes the Business Acquisition Loan You Need

Using a Business Consultancy Firm

You can contact a consultancy firm that specializes in business loans and SBA (Small Business Administration) loans. Though you will have to pay fees for their service, a good business consultancy firm can help you get the right lender for your business acquisition loan and will ultimately save you money.

Looking For Lenders on Your Own

You can look for lenders who make business acquisition loans. Examples of these lenders include credit unions or commercial banks. All lenders keep documentation (called underwriting guidelines) defining their requirements for qualification. Checking out the underwriting guidelines of a lender can help you decide whether you're dealing with the right institution. Some lenders make loans to certain industries while others only make loans that are guaranteed by the Small Business Administration.

Step 2 - Applying for a Business Acquisition Loan

After you choose a lender, you will have to follow their guidelines for submitting an application. Depending on the type of business acquisition loan and the lender, you may be required to submit financial statements, business licenses, or insurance certificates. Some lenders require that you either have experience in the industry or that you have a good business plan.

Step 3 - Lender Decides on Your Loan

If you meet the requirements and are able to convince your lender that you will make enough money to repay the loan, you will be able to successfully finance your business acquisition. The process takes at least six weeks. Remember that your lender may doubt your ability to repay if you delay providing the required documentations.

Tips for Obtaining a Business Acquisition Loan

Remember to try a variety of different lenders. If a lender rejects you, ask for a reason and use that information to your advantage. You can also use a loan broker who knows how to package a request for a business acquisition loan. Because lenders prefer to grant loans to buyers with experience, you should be able to demonstrate how your experience relates to the business you are buying.