Where to Get a Loan to Buy a Business

The person selling you the business may be willing to loan you the money to buy the business. For example, if you have a lot of experience working in retail, then buying a retail shop or boutique might be a good fit for your skills and experience. Buying a business can be a good way to skip some of the startup costs and growing pains of starting a business from scratch, like launching a product or service or building a customer base. Before becoming a money nerd, he has nearly a decade of experience as a writer, editor and digital marketing strategist.
This type of loan offers amounts up to $5 million and terms for equipment purchases are typically 10 years. Many lenders offer business auto leases in addition to business auto loans. Just like a normal lease, you will “rent” the vehicle for a length of time and then return it when the lease is up.

In addition, equipment financing doesn’t typically require collateral because the equipment serves as collateral on the loan. Below, you’ll find our picks for the best business acquisition loans and more information on how to qualify for financing. There are business loans with lower minimum credit what do you need to get a loan to buy a business requirements, with some skipping credit checks altogether. A merchant cash advance helps you get funding based on past credit and debit card sales. Payments are either a percentage of your sales or a fixed payment. But for most MCAs, you’ll have an aggressive daily or weekly repayment schedule.

The application process can sometimes be tedious with government grants. As a tradeoff, the pool of applicants may not be as deep—a factor that might improve your odds of receiving the cash award. In 2023, it’s expecting to disperse $8 million in funds to local organizations. The Small Business Innovation Research and Small Business Technology Transfer programs were established by Congress and offer billions in grant funding every year. Girlboss awards grants to creative women business owners twice a year—giving out $130,000 in grants since the organization began in 2014.
Although you’ll likely find it tougher to get approved for a small business loan with bad credit, it’s possible. Some lenders specialize in offering business loans to borrowers who have bad personal credit scores. However, If approved, a lender will most likely charge you a higher interest rate. While business loans from major banks might provide competitive rates for borrowers with strong credit, the application process can be cumbersome. If funding speed is a high priority, online lenders may offer faster funding.

Some lenders require a DSCR of 1.25 — a higher ratio is better — it means you have enough money coming in to pay your existing debts. Direct hotel lenders lend their own money to business owners looking for funding. These companies specialize in the hotel and hospitality industry and offer their expertise in addition to the opportunity to access capital. Bank and Small Business Administration loans can offer low interest rates and long repayment terms, but you’ll need to meet strict criteria to qualify.
Your first savings goal should be enough for a  sufficient down payment. You’ll pay interest on the amount you borrow only, and smaller credit lines may not require collateral. Funding generally comes through quickly, sometimes in a matter of days, if you go through an online lender. But their loans will also likely be more expensive than SBA options or those from a traditional bank.
Cannot be delinquent on any existing government debt obligations. Must be able to show the “sound business purpose” for which you plan to use the funds. Must have tried to find alternative forms of financing before turning to an SBA loan. Meanwhile, underestimating your funding needs can have similar challenges. Without the ability to fully fund your intended business project, you may not get a large enough return on your investment.

They require a down payment of 3.5 percent, a credit score of 580 or better and a DTI of 43 percent or less. These are small-amount loans typically offered by nonprofit lenders. Microloans are often geared toward traditionally underserved borrowers, such as those in low-income communities and those with limited credit histories.
Prospective borrowers will typically need a minimum personal credit score of 500 to qualify for bad  credit business loans. If you have bad credit, your goal should be to find a lender that offers a loan your score qualifies for, not a lender with the lowest rate or most favorable terms. When you apply for a small business loan, a lender normally reviews your personal and business credit scores to determine whether you qualify. A grantor, on the other hand, doesn’t check your credit since it doesn’t expect repayment. If you’re able to qualify, apply for a traditional loan through a bank because you’ll likely get the best loan rates. However, it’s difficult for startup businesses to qualify for a traditional bank loan.

Before joining NerdWallet in 2020, Sally was the editorial director at Fundera, where she built and led a team focused on small-business content and specializing in business financing. And you’ll risk losing the business if you can’t make payments on their terms. But small business owners often only offer to finance if they’re fairly confident in the business’s ability to earn. This is an attractive option for some because it doesn’t involve interest. It also does not involve the typical credit checks that come with applying for a business acquisition loan.
You will want to know your credit score ahead of time, but a credit report from the credit bureaus doesn’t usually include it. You can often get your credit score at no cost through your bank, a credit card issuer or a personal finance company — including NerdWallet. Once you determine the real estate, equipment or other eligible assets you want to purchase with the loan, you’ll submit a formal 504 loan application.
I am forever grateful for their support in helping my dreams, vision, and passion come true. In this step, we’ll cover the key actions needed to ensure a strong and complete submission. So, polish your pen and get ready to make a lasting impression on potential lenders. When buying a business, you should outline the steps for transferring control. Consider legal aspects, any personnel transitions, and even client or customer relations. Planning ahead will help you navigate potential challenges and minimize disruptions.

Evaluate the total cost of borrowing before committing to a loan. Although online applications are available for business loans up to $100,000, you must apply in person for loans over that amount. But you can find lenders that offer loans for businesses with at least $33,000 to $50,000 in revenue. The lender may still be willing to work with you if you don't quite meet the revenue requirement but have other signs of good financial health. Gather your most recent personal and business bank statements, tax returns, business license and incorporation documents . The lender may not require all of these documents, but it doesn’t hurt to have them available if needed.