Buying an established business is a great opportunity. It offers entrepreneurs a way to own a company, with the advantage of skipping the expense and risk associated with the startup stage. However, many individuals don’t have the capital to buy a company upfront.
That’s where Clarify Capital comes in. We offer financial assistance to entrepreneurs who need capital to buy a company. If you’re looking for a loan to buy a business, read on to learn about what you’ll need to get that funding.
Can You Get a Loan to Buy an Existing Business?
Yes, you can get a loan to buy an existing business. To qualify for a loan, though, lenders will consider several factors. These factors include your personal credit score, the amount you want to borrow, what you plan to use the loan for, and the type of business you’re planning to buy.
You may also need to provide a solid business plan and a cash flow forecast to support your loan application. The purchase price of the company and the value of the business based on its financial history and profitability also add points in your favor.
Of course, if you’re a business owner with a good track record in managing and growing a company, your chances of getting approved for a loan are relatively high. If you’re buying a new business, you may need to show more proof that it’s a profitable company. And for this type of loan, you may need to provide a personal guarantee (in other words, you’ll be responsible for paying back the loan if the business is unable to make payments).
At Clarify Capital, we help entrepreneurs get approved for up to $750,000 in small business loans. Whether you’re looking for a loan to buy another business or need working capital for your own company, talk to a Clarify adviser today to discuss your financing options.
How to Get a Loan to Buy a Business
Getting a loan to buy a business is usually similar to any other business loan application. Here’s a general overview of how to get one.
Choose a Good Lender
When you’re applying for a loan, shop around and choose a good lender. What you don’t want to do is spend so much time applying to lenders who don’t offer the loans you need.
You’ll also want to stay away from lenders who have vague terms. Look for a lender who will treat you with respect and explain the application process so you know what to expect. Fast funding and flexible payment terms are other big things to look for.
Clarify Capital strives to help you get the funding you need so you can achieve your business goals — whether that’s buying a business or growing a company.
We work with more than 75 lenders to get you the best rates. You’ll also have a dedicated adviser who will work with you throughout the process. He or she will help you choose the best financing option for you based on your business needs.
Apply for a Loan
Before beginning the loan application process, make sure to calculate how much you need to borrow. You don’t want to be in a situation where you borrowed so much that you can’t pay it off. On the other hand, if you don’t borrow enough, you might lose out on buying a business because you don’t have the capital you need.
Once you’ve figured out how much you need to borrow, do the calculations to account for interest rates and to show that you can afford the repayments. Then, apply for a loan and prepare the documents you need to support your application.
For business acquisition loans, you may need bank statements, financial statements from the business (like balance sheets), and your tax returns. The lenders may ask for a letter of intent where you explain why you need the loan and how you’re going to use the funds.
Use Your Loan to Grow Your Business
Some reasons small business owners apply for loans are to expand their operations, take advantage of growth opportunities, and cover working capital. This may include getting new equipment to increase production or buying commercial real estate to expand storefronts or manufacturing areas.
Loans also provide support for business owners to cover gaps in cash flow and pay their day-to-day business expenses. These include paying salaries and wages, purchasing inventory, and paying rent.
What Lenders Consider When You Apply for a Loan to Buy a Business
Different lenders have different eligibility requirements, but here are what most loan providers typically look for when you apply for a loan.
How Long You’ve Been in Business (If You Have a Business Already)
If you’re applying for a loan for a business purchase, your past success in running a company will increase your chances of getting approved for a loan. This is because lenders use your time in business to measure your creditworthiness. So, if you were successful in your other business, the lower their risk is for lending to you.
Many lenders require that you’ve been in business for at least six months to qualify for most loans. However, if you don’t have a business or if your business hasn’t been operational for at least six months, contact us and speak to a Clarify adviser to discuss your options.
How Much Revenue You Earn
Clarify recommends that businesses have an average monthly income of $10,000 for easy approval with online lenders. If your business or the company you’re trying to buy earns less than $10,000 a month, however, it doesn’t mean you can’t get approved.
Please contact us and talk to a Clarify adviser directly so we can help you. We can discuss your funding options and help you craft a strong application.
Your Credit Score
Most lenders require a certain credit score to get approved for business loans. This is why we recommend that borrowers have a credit score of at least 550. But if you have a lower credit score, don’t let that stop you from considering business loans as financing options. Contact us directly and speak to a Clarify adviser to discuss what you may qualify for.
Your Desired Funding Amount
The loan amount you want to borrow may also affect your ability to be approved. Clarify helps small business owners get approved for loans up to $750,000. But lenders may approve or deny your loan application to buy a business depending on several factors. These factors include your income, your personal or business credit score, and the type of financing or term loan you need.
They’ll also look at your track record in running a business. The business valuations, assets, and liabilities of the company you’re trying to buy will also come into play. The lenders may also ask for your plans for the business.
If you have any questions about your loan application, contact Clarify. We’re always ready to answer questions and discuss available funding options based on your needs and situation.
FAQs for Loans to Buy a Business
Can I get a business loan if I have poor credit?
Yes, you can be approved for a business loan even if you have a poor credit history. Make sure to contact us and speak to a Clarify adviser. Tell us your story so we can help you. You only need one lender to fund you, and we work with more than 75 lenders!
Can I get a business loan with no money down?
Yes, you can get a business loan with no money down. Most small business loans don’t require a down payment or collateral for business loan approval.
Is it hard to be approved for a small business loan?
The application process for a small business loan is very simple and easy with Clarify Capital. You can fill out our online application form in two minutes. You can then get approved and receive the money in your bank account in as little as 24 hours!
Unlike traditional bank loans and loans from credit unions and other financial institutions, Clarify offers small business financing with fewer requirements. We make the process easier and quicker, and we strive to help you find a business loan that suits your needs.