Business Acquisition Loan

Purchasing an existing business is another type of commercial loan request. Expanding businesses will often purchase vendors, suppliers or competitors. This can provide a strategic advantage and improve profit margins for growing companies. Sometimes a manager who has been with a company for several years expresses interest in purchasing the business from the current owners. Business acquisition loans can be easier to get if you have direct industry experience, and the business is performing well.

In general, no lender likes to lend money based on a turnaround strategy. If the sales trends are declining you may not be able to get a loan for that business. Certainly you wouldn’t buy the business if you couldn’t improve it’s operation and grow it; however, if there are significant issues with the existing business and it’s performance, you will have a difficult time convincing a lender to give you a commercial loan.

Be prepared to discuss and justify your reasoning behind the purchase price. Lenders know the price of a business can be measured on several things. Your lender will check to make sure the business is really worth the asking price. Sometimes an independent business valuation is ordered to determine a fair market value for the business. This is an unbiased value that lenders use to determine the maximum loan amount. If you feel a premium should be paid for the business you will need to explain why.

Take the time to help your lender understand why you want to purchase the business. Help them see your vision for what the business can become and how it will perform. Be prepared to confidently discuss the numbers of the existing operation and what changes you plan on making to enhance the projections. The request must make sense to your lender. The more you help him/her see your strategy in acquiring the business, the easier it will be to get your loan request funded.

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