5 Key Components Of A Small Business Acquisition Loan

 5 Key Components Of A Small Business Acquisition Loan

Summary:

To secure a business acquisition loan, you need to understand and manage the key components of the purchase the lender will be interested in. Here you will learn about the 5 key components of a business purchase and some insight as to how to effectively manage them to secure financing.

 

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Major Challenges To Securing A Business Acquisition Loan

Qualifying for a small business acquisition loan can be quite an ordeal, to say the least.

If the business being sold is very profitable, the selling price will likely reflect a significant amount of goodwill which can be very difficult to finance.

If the business being sold is not making money, lenders can be difficult to find even if the underlying assets being acquired are worth substantially more than the purchase price.

Business acquisition loans, or change of control financing situations, can be extremely varied from case to case.

That being said, here are the major challenges you'll typically have to overcome to secure a small business acquisition loan.

>>> Financing Goodwill

The definition of goodwill is the sale price minus the resale or liquidation value of business assets after any debts owing on the assets are paid off. It represents the future profit the business is expected to generate beyond the current value of the assets.

Most lenders have no interest in financing goodwill.

This effectively increases the amount of the down payment required to complete the sale and/or the acquisition of some financing from the vendor in the form of a vendor loan.

Vendor support and Vendor loans are very common elements in the sale of a small business.