5 Ways to Finance a Business Acquisition

Starting a business comes with its challenges but one of the major things that determine the success of the project is the finance aspect. The same applies to purchase a business, as getting adequate finance to buy a business can prove difficult in most cases. However, there are different ways you can cover the operational costs and make things turn out smoothly for your business acquisition.

1. Personal or Company Funds

This is often the most common way to purchase a business, especially if you have enough funds stacked up personally or in your company. This could help you save and also reduce the risk of accruing debts. Your funds could include your savings, investments, retirement accounts, and home equity while your company funds could be how much you have saved over time. Whether you are buying this business personally or as a company, your already stashed money can come in handy.

2. Bank Loan

Bank loans seem like an easier way out but they could also be difficult to get, as banks would rather lend funds against existing assets. However, in this case, you are about to purchase a business and probably only have business plans. To get bank loans to help finance the business you intend to buy, you will need existing personal assets and a good credit card to help you stand a chance. 

3. SBA Loans

SBA loans are loans provided to small businesses and might just be a better option to bank loans. The SBA does not directly loan small businesses but rather works with lenders, including banks, to provide loans to small businesses while working with set guidelines. The SBA has their minimum requirements and despite the long checklist that you have to tick off, it is a straightforward process that makes acquiring loans easier for you. The perks of this are that you have flexible overhead requirements, lower down payments, and no collateral required for some loans.

4. Third-Party Financing

There are several lenders out there who will gladly help fund your new business but on their terms. It could be non-traditional financial firms, which are private equity firms that will provide you with profits to run the business while acquiring some of the equity in the firm. This will help you not only to have access to loans to run your new business but will also help you network with other industry professionals. 

5. Seller Financing

This is a method that allows the seller of the business to provide you with a loan indirectly. You could pay a fraction and make plans to pay the rest over some time from the revenues gotten from the business. This especially works when the seller is ready to exit and is flexible with the payment plan.

Conclusion

Buying a business does not necessarily have to look impossible, as you can try different methods to finance it and make your dreams come through. Either of these five different ways can help you get going but it will depend on the business and the amount required.