If you’re considering buying a business, a bank loan can give you the funds and flexibility you need to fund your purchase. It’s important to think about the ways you can pay for a business, even if you have the funds available already.
In this article, we’ll tell you how you can get a loan to buy an existing business, and what you can expect when applying for one.
There are several ways you can apply for a purchase business loan. The most obvious one is to head directly to the bank itself. You’ll talk to a banker about the type of business you want to purchase and your current financial situation. As the bank is looking to make a relatively safe financial investment, they will be looking at the key financial information of the business you’re looking to purchase. This could include profitability, cash flow, growth potential, sales forecasts, and more. If they believe you’re going to be able to make money and repay the loan, they may grant it to you, though you will usually need to provide security for your loan.
Your other option is to secure a loan through a broker. Generally, a broker will give you a better idea of what options are out there for business loans, as they have both industry experience and connections with major banks, secondary and tertiary lenders and non conforming loan providers. While they may charge a price upfront, they will compare all the business loan options available to you to find the one that will give you the best results in the long-term.
A business loan broker will use the same information you would give the bank to deliver unbiased information on business loans. Additionally, they will be able to establish which loan provider will best meet your needs, and compile the data and documentation you need to apply for the business purchase loan.
Regardless of whether you choose to find a business loan through a loan broker or directly through a bank, both will require the following information and documentation from you:
When you are ready to start the application process for your business loan, make sure you have all of the required information and documentation gathered and ready to submit. The easier you can make the process for the lender, the more likely you are to be approved for a loan. In addition, it is important to have a realistic idea of how much you will need. At the very least, you should be able to justify logically why you need the amount you are requesting. If you’re not sure how to prepare this information, a good loan broker will be able to help you put together the necessary data and documentation.
The main difference between a secured business loan and an unsecured one is the requirement of security. A secured loan will require you to put something forward as collateral, so that if the loan cannot be paid back they can still use your assets to recoup the loss. This security could be property, business assets, or other assets, such as a share portfolio, as long as it has monetary value.
On the other hand, unsecured business loans don’t require security. However, it will typically carry a higher interest rate because of the higher risk. Unsecured loans are generally for smaller amounts (under $100k) and can often be approved quicker, so they are worth considering.
Ultimately, the loan that’s right for you will depend on your unique circumstances. You will need to look at both types of loan and compare them to work out which one is best for you.
To make sure you get the right business loan for your needs, your best option is to talk to an expert. With years of experience and a team of finance brokers, investment strategists and financial experts, we can provide you with comprehensive and unbiased advice tailored to your situation. We have helped many business owners acquire loans that have helped them launch their businesses the right way. Contact us today for more information on existing business purchases and loans.