Are you short of funding for a particular project? Does your company’s budget need a boost to acquire a big asset? A business acquisition loan can help you accomplish your goals quickly while removing the monetary constraints that are limiting your growth cycle.
Right now, you might be asking what a business acquisition loan is, how to get it, and what are the requirements. All the answers you need can be found below.
What Is It?
What is a business acquisition loan? It’s a type of loan that will allow you to:
- Buy a business franchise
- Buy out partners to attain sole rights of your company
- Buy another smaller business and merge it into your company
- Buy a new asset, such as a warehouse, commercial real estate, heavy equipment, office furniture, or personnel equipment
Business acquisition loans are generally less risky than startup loans since you’ll be the buying assets you need to attain essential growth rather than grow your business from nothing.
If you need any of the following items, then looking at how you’d get approved for a business acquisition loan should be on our radar.
- Eliminating possible competition by buying a competitor’s franchise
- Assimilate a smaller business into your company
- Improve business operations and output
- Initiate a partnership buyout
The primary advantage of a business acquisition loan is that it allows you to get funding to expand business operations or improve the quality of products and services without touching your own money. It also won’t expose you to risky debts.
Business acquisition loans refer to four available types of business lending that will allow you to grow in different stages. It might be confusing if the lender asks what type of business acquisition loan to get. Read this section to know which to apply for.
Say you find a small business that failed but seemed promising to you that is selling for $100K, but you only $30K to invest. So how do you acquire his business despite not having the money needed at hand?
The answer, a startup loan for the remaining $70K.
You don’t need to have an existing business to apply for a startup loan, you can apply simply if you want to buy an existing business and make it your own.
The requirements for this loan are a solid understanding of running a business and a concrete business operations plan. Based on your credit rating, business acumen, and the strength of your business plan, you could receive a loan from $5,000 – $750,000.
Basically, getting this type of business acquisition loan may be your first stepping stone. Be prepared, however, for numerous interviews with the lender, along with a thorough evaluation of your business strategy, personal credit, and financial background.
If you’re already an existing business offering quality products or services and want to exceed your current growth cycle, then an expansion loan might be just what you need.
Business expansion loans provide funding for business expansion purposes amounting from $10,000 – $25,000,000 depending on who the lender is, which SBA dolling out the heftiest amounts.
The money you receive could be used to build a second branch, expand your current one. A business expansion loan can help cover things like a new building location, the cost of additional manpower or equipment.
With a business expansion loan, you can initiate the growth of your business even if it doesn’t have the required financial capital yet.
To get this loan, you have to provide lenders with accurate and transparent information about your business operations. This includes cash flow, sales, number of employees hired, statistical figures about the competency of your business’s products or services in the market.
The higher your business credit rating, current revenues, and positive cash flow, the greater the limit you’ll be able to apply for.
Another type of business acquisition loan can be used to financing equipment purchases. In this type of loan, the amount of money given by the lender can also depend on the total value of equipment or real estate that you offer as collateral.
Examples of businesses that can enjoy equipment financing are rental shops, video game centers, fitness gyms, construction firms, printing shops, and food production businesses.
The primary advantage of equipment financing is if you have collateral, it won’t require credit checks or evaluations of your business. This type of business acquisition loan is the fastest to get so long as you have the equipment, which the lender can place monetary value. Do note that applying with defective or outdated pieces of equipment won’t help.
SBA loans are tailored to provide a lot of funding for numerous business purposes. Upon release of money, however, 10% of the total amount will be deducted as a down payment. Another downside is that the application for this loan takes a long time, as you can’t interact with SBA directly, but only with SBA-certified lenders.
Below you’ll find answers to our frequently asked questions about all four types of business acquisition loans.
When registering for your DUNS number, you can expedite the process by paying the $229 fee for a DUNSFile which speeds up approval to less than 5 business days. If you’re an Apple developer, you can get the same fast process for through their system.
Lastly, for those in Asia, there’s the DUNS Registered SEAL, which has an even faster process, but also lots of false websites selling it. Unfortunately, the CCR government contractor loophole has been closed with the opening of SAM.gov (System for Award Management).
After registering for a DUNS number, you’ll typically receive it with 30 business days (6 weeks). There are a few ways to expedite the process, such as paying $229 to create a DUNSfile which allows for application processing in 5 business days or less. You can also get the same deal for free if you’re an Apple Developer.
Cash-like transactions on Chase Business Ink credit cards are a reference to lottery tickets, casino gaming chips, race track wagers, or similar betting transactions. It can also refer to any checks that access your account, interest, unauthorized or fraudulent charges, or fees of any kind, including annual fees where applicable.
Banks and credit unions generally provide the lowest interest rates for business acquisition loans, but also have the lowest rate of approval. Banks also usually take time to approve applications since they require a lot of documentation such as tax returns, cash flow documents, business plans, and business backgrounds.
If you need cash quickly, then you might want to try an alternative online lender. The documentation they require is more credit score than business-plan related, and approval can happen within hours or just a few days.
Before accepting a loan deal, be sure to read the fine print, as well as, be fully aware of interest rates, and early loan payment fees. As well, you want to use a reputable lender whose recent reviews are all positive.
Once you apply for a business acquisition loan, the lender will check your credit score (personal and business). Having an EIN or DUNS number is beneficial in this case as it will help make your financial standing good. Also, it might prevent personal liability if the business acquisition loan defaults.
Multiple DUNS numbers can be issued if you own a business located in different locations. For example, if you have a business in New Jersey and New York, then both may have a DUNS number that’s distinct from each other.
On the other hand, the same DUNS number may be used if your business and its branches are located in the same location. In contrast, multiple DUNS numbers will be issued if your businesses have the same name but, operate in different industries, or has different legal entities.
Governments working with DUNS and Bradstreet strongly require businesses operating under their jurisdiction to get a DUNS number. This is because it allows them to monitor the operations of businesses without directly interfering with them. Basically, it helps governments see that businesses do not make transactions with entities that threaten national security.
With Duns and Bradstreet’s DUNS number, governments also get to monitor the economic performance of certain markets. This is because data collected from businesses can be analyzed by agencies whose task is to monitor the growth or withering of specific sectors in the market.
In general, most loan applications at ROK Financial include the same primary elements of credit scores, business banking records, and a list of collateral or company assets. Bank references and proof of sufficient deposits will most definitely help speed up your approval process.
In regards to accounting numbers, ROK Financial can require items annual gross sales along with monthly gross margin, cash flow, debt to equity ratio, accounts payable and receivable, earnings, and monthly sales volume.
ROK Financial is known as a fast money provider, who has implemented many online systems and procedures that speed up the loan application process. As long as you’re able to quickly supply the documentation they request in your funding checklist, you could receive funds in your bank within 24-72 hours.
ROK Financial is known as a fast money provider, who has implemented many online systems and procedures that speed up their loan application process. As long as you’re able to quickly supply the documentation they request in your funding checklist, you could receive funds in your bank within 24-72 hours.
No. ROK Financial does not directly provide loans to their clients and is an intermediary between lenders. They use underwriters like Fintech, and their strong personal network includes a bevy of carefully selected lenders that offer a wide variety of loan and approval requirement options.
There are many options for you to choose from at ROK Financial, which include:
- Small business loans, startup funding, business line of credit, and SBA loans
- Equipment financing and AR financing
- Asset-based loans, fix and flip loans
- Merchant cash advance and franchise financing