What Is Small Business Acquisition Financing?
A business acquisition is a process of purchasing the company that is based on the weak or strong sides of the acquiring company. There is a little difference between purchase and acquisition though.
In the result of the acquisition, two companies merge together and create a single but more powerful company. The acquisition is built around the common goals and interests of two companies.
Still, the cost of business acquisition is usually quite high.
When financing a small business acquisition, you can apply to the SBA. Speaking of the SBA, it’s one of the most reliable ways to cover business expenses. The SBA doesn’t give money to a seller financing business acquisition. It deals with banks, who in their turn finance business owners.
With the help of the 7A loan, businessmen can get up to $5 million to finance the acquisition of the business.
SBA requirements are quite strict. Therefore, to get financing a small business acquisition from the Small Business Administration a borrower should:
- have good credit;
- provide 20% down payment;
- three years of tax information;
- proofs of creditworthiness;
- and personal information.
While looking for financing business acquisition, you can also apply for a conventional or term loan from the commercial bank. In this case, banks require assets and the borrower must have good credit and substantial track record in the sphere.
As a business acquisition financing, you can use a leveraged buy-out. This is a great way to maximize your benefit but you have to be sure about the business because the losses are also very solid and the impact on your credit is also big.