What Can I Use an Acquisition Loan for?

An acquisition loan is used for the purchase of a business or franchise. Think a mom and pop shop with a proven track record with proven cash flow or a franchise like Subway. The capital would be used to help you purchase the existing business or franchise.

How Much Capital Is Available?

There is a large amount of capital available for business acquisition loans as they tend to carry less risk than traditional business loans. The amount of capital available to you is only limited by the value of the business you are looking to acquire and the collateral you have available to secure the loan. There are also ways to obtain a seller financed acquisition loan in which you make purchase payments to the seller over time instead of a bank.

How Do I Qualify?

Like most loans, qualifying for an acquisition loan comes down to the value of the business being acquired, the borrower’s credit history, and the collateral the borrower has to help mitigate the risk for the bank. The better prepared you can be with information to substantiate all three of the items, the quicker you can be approved for an acquisition loan.

What Type of Interest Rate Will I Pay?

Acquisition loans tend to have relatively low interest rates ranging from 4.5 to 7% given the high collateral requirements for these types of loans.

How Quickly Can I Get Approved?

Acquisition loans can be made in as little as one month and can take much longer depending upon the evidence of collateral for the loan. If you are buying a business at a discount that has clear value and existing cash flow,

Summary

Acquisition loans are the type of loan you want to use if you are looking to purchase an existing business or purchase a franchise. The loan helps you purchase the business and approval is based on the businesses history/value, your credit history, and the collateral available to help mitigate the risk for the bank.

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