Can I use an SBA loan to buy a business?
SBA loans offer an affordable and flexible solution for borrowers’ intent on small business acquisitions.
The loans can be used to finance a wide range of business services including funding startups due to its flexibility and ease of access.
Approved borrowers can have access for up to US$5 million in funding for terms of up to 25 years at low interest rates.
Even though the SBA does not issue direct loans, it offers approved SBA lenders guarantees for the loan or a portion of it.
The SBA will cover all or a portion of the loan in case a borrower fails to pay back the loan as per the agreed terms.
This minimizes risks to lenders and makes the loans easily accessible to a wide range of small business owners to help them grow.
You have to meet the stringent requirements and wait a long time that may take several months, before you get a loan.
To qualify for an SBA 7(a) loan, you have to sign a personal guarantee in the event that you own more than 20% of the business.
Your personal and business credit score (FICO SBSS Score) needs to be 140 or more. You will also need to show proof of having sufficient cash flow, no federal government or student loans, and no past or present criminal history.
The acquisition business also needs to not operate in an excluded industry such as life insurance, loan sharks, pyramid like schemes, or engaged in political and religious activities.
You will be required to provide a fully completed SBA loan application, business financial statements such as profit & loss, annual projected income statement, personal financial statement, 3 year personal and business tax returns, and a detailed explanation of how you will use the loan to better your business.
If you need access to quick business loans or are patient enough to wait for an SBA loan approval, register your details online and tell us how much you need.
Let us help you find an SBA approved lender or an alternative lender, and get multiple loan options to choose from.
What is the average interest rate on a business loan?
Business loan rates vary depending on the specific strengths of the transaction. The rates are based on the spread over the prime lending rates (PLR).
Interest rates range from 4.75% to 8% or more on average. Some lenders offer APRs ranging from 8% up to 30%.
What are the requirements for an SBA business loan?
Most lenders offering SBA business loans take into consideration the following terms when evaluating a potential loan borrower:
Good Personal Credit
You need to have a good personal credit scores ranging from 650 minimum or more.
Seller Signed Letter of Intent
Before getting an SBA loan term sheet, you need to have a seller signed letter of intent stating the proposed terms for the business acquisition.
A detailed letter of intent should show the acquisition offer is dependent on securing financing for the deal, and gives you a reasonable time to get funding.
Borrower information, guarantors, and previous government debt information is a vital requirement as part of an SBA loan application.
Personal Financial Statement
This determines your repayment ability and creditworthiness. It has all financial information about you, your business, owner equity information, and loan guarantors.
Personal and Business Tax Returns
You will be required to provide records of 3 years of personal tax returns, and 3 years of tax returns for the business you are looking to acquire.
Business Financial Statements
Most lenders would need you to provide 3 years of financial statements of the business you are intent on buying such as a balance sheet, cash flow statements, and profit and loss statements.
Business Debt Schedule
A debt schedule outlining all the debts and liabilities of the business you want to acquire is very important when making a loan application.
Business Management Experience
Though not a must requirement, stating your experience in the industry of the business you are trying to buy goes a long way in convincing most lenders to approve your loan request.
It shows lenders that you are able to manage the new business acquisition well hence being less of a risk.
Debt Service Coverage
Divide the net operating income by the debt service to get the debt service coverage ratio. This is the ratio of cash available to cover debt, interest, and lease payments of the business.
A higher ratio of more than 1.15, makes it easier to get a loan approval.
Loan Down Payment
A majority of SBA lenders prefer a 20% down payment before a approving a business acquisition loan. The down payment shows your overall commitment to the new business.
You can negotiate with the seller to extend financing to you in order to reduce this amount. Even if you get seller financing, you will still be required to provide a 10% minimum down payment.
Which is the best small business loan?
If you are looking for a small business loan, most lenders will review your information such as credit history, time in business, and revenue to determine your eligibility.
A business loan makes buying a business easy and if you meet the necessary qualifications, you may receive average interest rates as low as 5.5% and save a lot of money.
Some of the best available small business loans include SBA loans, and private lender loans all of which offer loans with different terms.
How can I get a small business loan?
To get a small business loan, you need to apply and have records of your business financial performance and evaluation, a business plan, and financial projections.
You should be able to offer business acquisition loan down payment, and show any related experience that may help convince potential lenders that you can successfully manage, and grow the business to be able to pay off the loan.
We have SBA approved lenders and alternative lenders in our large database and may be able to assist with multiple business loans for your small business.
If you are not prepared with all the paperwork needed, you may want to look for other sources of funding for your small business like investor financing, in exchange for an equity stake in your business.
You may also want to consider:
Business line of credit
SBA micro loans
How much of a business loan can I get?
To know how much you can borrow and interest payable, you may want to search online for a business loan calculator.
Most online lenders can advance business loans from as low as US$100,000 minimum if your business is located in the United States of America, or $3 million minimum if you own a foreign based business.
There are no maximum amounts you can borrow. You can request for as much as you need provided you have all the necessary paperwork to meet most of our lenders terms.
How can I buy a business with no money?
To buy a business with no money down, or get a business loan with no collateral, you may want to consider:
Sometimes when you buy a business, the existing business owner may offer you a seller financing agreement whereby the seller will handle the business loan acquisition process instead of a traditional or alternative lender.
With seller financing, you may have to put up a large down payment of between 20% up to 50%. The down payment depends on the agreement you have in place with the seller.
The remainder of the purchase price plus interest is to be paid back in agreed installment payments with terms lasting up to 5years.
If the business you want to buy comes with existing equipment that will be part of the sale, you can cover a portion of the cost of the business acquisition with an equipment loan.
Depending on the type of business you want to buy, the vast majority of the purchase price may be based on the value of the business equipment.
Equipment loans are offered with affordable interest rates since the equipment serves as collateral for the loan.
You may be required to deposit a large down payment and have good credit history to qualify for equipment financing.
Crowd Funding or Peer to Peer Loans
Crowd funding or P2P loans can be a solution to your business acquisition with no money down. Though it may not raise you enough funds to cover the entire costs of buying the business, it can be a good option for you if;
Your business purchase will enable you to produce an innovative product with which you can reward your donors.
The business acquisition will increase your net worth which you can share with the donors in the form of an equity share ownership
Investment financing is another option you may want to consider when looking for ways to buy a business with no money down.
Investors be it angel investors or venture capital can be a great source of money to buy a business you want to grow and get involved in.
Provided you can convince a few investors and give them a good enough reason to invest in your business ideas, you may get backed and get up to 100% of the costs of the business acquisition.
You may not have to put your own money into the investment. It helps to have some business experience or time in business for lenders and investors to be willing to take a chance on you.
You may want to consider using the assets of the business you want to buy as well as your own for collateral. The assets must be worth more than the total loan amount you want to borrow.
How hard is it to get a small business startup loan?
To get a small business startup loan, you will be required to prove that you have the needed experience and financial resources available to properly run and manage the business.
Most startup lenders may also require you to prove your seriousness about the venture by making a down payment, or showing proof of an equity stake of at least 20% in the startup business.
Startup loans are offered by most banks, SBA approved lenders, and other private lenders.
How can I get a $50,000 loan?
If you are looking for a US$50,000 loan for a business, your choices may be limited as most lenders prefer minimum loan amounts of $100,000 or more due to the many stringent requirements.
Huge underwriting fees and other costs may make your loan request not prove worth the risks for lenders. There may be lenders willing to offer you such low loan amounts though at higher interest rates and shorter terms.
You may also want to consider getting an SBA micro loan.
How do I fund my LLC?
To fund your LLC, you may want to consider getting;
Business Expansion Loan
How can I start a business with no credit?
If you want to start a business with no credit, you may want to do research and find potential investors who are willing to offer you a loan with no money down.
You may also want to consider;
Crowd funding or peer to peer lenders
Donations from family and friends
Can I use my EIN to get a loan?
Yes, you can expect a potential lender to ask you to provide some if not all of the following:
Basic information about you and your business
Your personal and business bank statements
Your personal and business tax returns (EIN)
Business financial statements and debt schedule
Business plan and relevant documents indicating industry experience
Your business valuation information
Loan collateral or down payment information
Business licenses, ownership documents, and legal contracts
Business sale contract or letter of intent signed by seller
When you have all the necessary required documentation, you will be able to fill, complete, and submit your detailed loan application for approval.
Can I start an LLC with bad credit?
Trying to get a business loan with bad credit to finance an LLC can be challenging. You are likely to have fewer financing options available though, alternative lenders can be your best option.
It is important to approach any financing option with an open mind even with your bad credit. Any lender willing to loan you money for your LLC with bad credit will most likely:
Charge you higher interest rates and fees
Offer smaller loan amounts than you may need for your LLC
Require short pay back terms and large monthly payments
There are many alternative lenders offering business loans to companies with bad credit. The loan amounts may be lower than your expectations and fees charged may be higher.
Is it harder to start a business now?
No, you can start a business, grow it and become successful at any time regardless of the prevailing business conditions worldwide.
Good research in your business industry, proper financing, organized sales structure, and good client relations are what it takes to start a business and become profitable anywhere in the world.
How can I get a loan of $2 million or more?
Do you need a $2 million loan or more for a business or project? Whether you are located in Canada, UK, US, South Africa, Australia, Middle East, within Europe, or worldwide, you can apply for a loan from a local bank, credit union, or online lender.
Most SBA lenders offer loans of US$3 million which is government backed and does not require too much collateral.
You may also apply online through our site and get access to multiple lenders who are more than willing to loan you $3 million at fair interest rates and flexible repayment terms and duration.
Most banks and credit unions have strict requirements and you may want to consider applying for such a loan amount through our website.
We will link you to multiple lenders who may be more than willing to loan you $2 million or more at reasonable interest rates and flexible terms.
Email us for more information.
What are the payment terms on a $2 million or more loan?
The monthly payment on a $2 million loan is calculated based on the loan amount, rate of interest, and length of the loan, assuming a fixed interest rate.
Does a business loan affect personal credit?
If you offer a personal guarantee for a business loan or line of credit you have taken or intend to take for a business, it will most certainly affect your personal credit score.
How does interest rate work on business loans?
Interest on business loans is charged as a percentage of the loan’s principal amount at set payment duration monthly or annually.
Lenders offer loans in exchange for charging an interest on the loan advanced and repayment is set at regular amounts, over a given duration.
How can I get funding?
To get funding for your business or project, you will need to;
Know how much you are looking for, and decide if you can self-fund
Look for angel investors or venture capital
Join P2P networks or crowd-funding platforms to raise funds.
Apply for a business loan from SBA approved lenders
Get loans from alternative lenders online
Apply or request for funding through our website. Email us for more information.
What are the different types of funding?
Some of the most popular types of funding for businesses include donations, business loans, business lines of credit, government grants, savings, investments, subsidies, tax refunds, venture capital, and angel investors.
Should I get a business loan or business line of credit?
A business line of credit offers extended credit that you can use for regular payments and you only pay interest on the amount of money you use.
A business loan gives you a lump sum amount of money with interest due on the total loan amount. Whichever you see fit for your business, all you need to do is apply and get approval.
How can I start a business with no credit?
If you plan to start a business but have low credit scores and finding it hard to access funding, you may want to:
Seek financing or loans from your close friends and relations
Look for loans from alternative online lenders
Apply for government grants for small businesses
Join P2P or Crowd-funding networks to raise funds
How can I get a business loan without a collateral?
Looking for a business loan but have no collateral to back your loan request?
You may want to consider:
Fixing your personal credit score by paying any outstanding debts
Have a good business plan & executive summary
Calculate and get to know your business cash flow projections in your financial statements
Apply for unsecured business loan or SBA loan
Join P2P networks to raise funding
Get a credit card for the business
What does it take to get a small business loan?
A better business credit score as well as good personal credit score is a requirement if you want to get an SBA loan, or qualify for funding from traditional lenders such as banks.
Your business revenue, cash flow and time in the business may also be analyzed to determine your eligibility for a small business loan.
What is a collateral for a business loan?
A collateral is an asset or real property e.g. home, business inventory, equipment, cash savings or deposits, offered as a guarantee for a business loan in case of default in payment.
It can be seized by the lender and sold to recoup the loan amount given in case of default. The value of a loan collateral usually exceeds the loan amount to be borrowed.
Most lenders require a small business to offer collateral for a loan.
How much of a business loan can I get?
You can borrow a business loan from as low as $100,000 minimum or more depending on your business funding requirements. Provided you meet all the necessary lender requirements, there is no maximum limit to the loan amount you can borrow.
Can I get an SBS loan with no money?
If your business is a startup or small business that does not meet SBA loan requirements, or cannot afford to make a down payment, your business may still qualify for an SBA microloan. Loan amounts may be up to a maximum of US$50,000.
What is the average interest rate on a business loan?
The average APR Interest rates for business loans can range anywhere from 2.5% up to 71%. The higher the loan amount, the lower the rate of interest and the longer the payment duration.
Is SBA loan a good idea?
An SBA business loan is a great option for business owners looking to hire new employees, open a franchise location, refinance an existing business, and for a business acquisition.
The rates and terms of an SBA loan are more manageable than other loan types.
Do you offer CBD business funding?
Are you looking for CBD business funding?
We can also help with;
CBD Small Business Loans – For revenue generating CBD businesses that are operational for a minimum of 3 months. Legalized States only and a loan minimum request of US$100k +
CBD Equipment Loans – For new and used equipment for the CBD industry including growing, extraction, transportation, packaging, etc. Legalized States only and a loan minimum request of US$100k +
CBD Real Estate Acquisition - For Real Estate that will include CBD in some way: Dispensary, Storefront, Warehouse, Extraction Facility, Rental Property, etc. Legalized States only and a loan minimum request of US$100k +
Large CBD Startup Loans - For $10 Million + CBD loan requests including CBD Start-Ups. Combines Real Estate, Equipment & Working Capital. Legalized States only and a loan minimum request of $10 Million +
Email us stating your exact request, your current business location and amount of funding you need in the brief summary form.
Note: Funding is only available for legalized states in USA and Canada.
What Large Projects Can We Offer Financing For?
Alternative Energy: including oil, gas, wind and solar. Any newly formed proprietary patented technology that is tested and verified
Real Estate: acquisition and development; 5-units and higher;
Commercial Services: senior living (assisted living with FULL medical infrastructure/support included)
Health: Hospital, Nursing Homes, Medical retreat facilities, R&D Labs
Water and Sanitation: Water treatment and sanitation plants
Reclamation /recycling Products: which include medical, commercial invention (on a qualified basis)
Manufacturing: Textiles, Agricultural, Health Products, etc.
Business Financing: based on a review and qualification, certain project types not listed or related may be qualified for finance.
NOTE: A project has to qualify for and clear underwriting and due diligence process. The minimum request amount we accept for large projects is USD $3 million up to USD $500 million or more.