If you are looking to purchase an existing business, one of the major challenges you face is sorting out the financing for the purchase. For many people, this is a major hurdle, and they are unsure of how to overcome it. Fortunately, there are various solutions available when it comes to getting business loans for this type of purchase. The different options are designed to suit a wide range of needs and circumstances.
What Are The Key Options For Business Loans?
You can access a range of different options for business loans if you are looking to buy an existing business. The solution that is best suited to your needs will depend on a range of factors including your credit score and history as well as your financial status. With some of these options, you may need to have additional funding sources available. So, let’s take a look at some of the key options for those looking for business loans:
Get an SBA Loan
SBA business loans are very popular amongst those who want to purchase an existing business. They are designed for people who have a good credit history and score, and they can offer very competitive interest rates as well as longer repayment periods. This enables you to keep repayments down in addition to getting the financing you need for your business acquisition. Many lenders favor SBA loans for customers who want to purchase a business because they have the reassurance of a partial guarantee from the American Small Business Administration.
Consider an ROBS
Many people are totally unaware of this option, but it can provide an excellent means of raising the money you need to purchase a business. ROBS stands for Rollover for Business Startups, and it basically enables you to gain access to your retirement funds without the need to worry about tax payments or fees for early withdrawal. One of the key benefits is that you will not get yourself into debt with this option because it is not actually a loan. You are withdrawing from your own funds so you won’t owe any money unless you have to take additional financing to make up the amount required.
Financing from the Seller
Another option that may be suitable for you is seller financing, which is where the seller of the business finances some or all of the cost. If you have damaged credit or there are other reasons you cannot access traditional business loans yourself, this could be a great option. In addition to being able to get the money you need even with poor credit, you have the reassurance that the seller of the business is willing to invest in both the business and you.
Tap into Your Home Equity
If you are a homeowner, there is an additional option open to you. This comes in the form of a Home Equity Loan (HEL) or Home Equity Line of Credit (HELOC). With both of these options, you will need to have at least 20 percent equity in your home as well as a pretty decent credit score. If you meet the criteria, you can access a line of credit or lump-sum loan that is secured against your home. One of the benefits of these business loans is that they can work out to be more affordable than other options. However, you must bear in mind that they are secured against your property so it is vital that you can keep up with repayments.
Get Your Loved Ones to Invest
One final option you may be able to consider is getting investment from friends and family members. If you have people, who are close to you and have money they can afford to invest why not ask them to invest in your business? Many will be happy to do this, and this has become a very popular means of funding for those who are looking to buy an existing business. The more friends and family members you can get on board, the better your chances of being able to raise the amount of money you require. One thing you should do is ensure it is all above board and official as this means less strain on relationships. Get a proper loan agreement drawn up and signed, make arrangements about the terms of the loan, and be sure to make repayments on time.
Embark on an Exciting New Journey
Once you have secured the financing you need for your business purchase, you can look forward to embarking up a new and exciting corporate journey.