Best Business Acquisition Loans

Compare funding options to buy a new business.

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Best business acquisition loan lenders: More details

Live Oak Bank: Best for SBA loans

Up to $5,000,000 for 7(a) loans, up to $9 million with combination financing

Not disclosed

120 to 300 months

Pros
  • Larger loan amounts
  • Long repayment terms
  • Capped interest rates
Cons
  • Longer funding time (45 days on average)
  • Requires a UCC lien and personal guarantee
  • May impose a prepayment penalty

Why we picked it

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If you’re interested in pursuing a loan backed by the Small Business Administration (SBA), Live Oak Bank commonly uses the popular SBA 7(a) loan for its business acquisition funding. This gives borrowers access to up to $5,000,000 in funding with loan terms up to 300 months and capped interest rates. Some borrowers may qualify for larger amounts up to $9 million by using a combination of SBA and conventional financing.

Yet, Live Oak Bank doesn’t disclose its exact interest rates, which can make it difficult to tell if you can afford the loan. In addition, its funding times are much longer than those of some of its competitors, extending up to 45 days on average.

Read our full Live Oak Bank review.

How to qualify

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In order to qualify, you’ll need to meet Live Oak Bank’s criteria of:

  • Minimum credit score: 650
  • Minimum time in business: 24 to 36 months, depending on loan type
  • Minimum annual revenue: None, but imposes a debt service coverage requirement
See Your Business Loan Offers

BHG Financial: Best for established businesses

$500,000

8.69% Minimum APR offered for a 144-month term

144 months

Pros
  • Long loan terms available of up to 144 months
  • Affordable starting interest rate
  • Relatively fast funding (3 days)
Cons
  • Not transparent about its eligibility criteria
  • Maximum loan size ($500,000) may not be large enough to fund some acquisitions
  • Requires a UCC-1 lien

Why we picked it

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BHG Financial touts that it can provide funding in as little as three days and it offers longer-than-typical loan terms that extend up to 144 months. Plus, at just 8.69%, the company’s starting interest rate is fairly affordable, making it a decent choice for those who can meet the qualifying criteria.

Unfortunately, though, BHG Financial doesn’t disclose its eligibility criteria. However, its consumer profiles show that the company’s average business acquisition loan borrower has nine years in business and a personal FICO Score of 771, suggesting it’s likely only a good fit for established businesses.

Read our full BHG Financial review.

How to qualify

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BHG Financial doesn’t disclose its eligibility criteria, including its minimum annual revenue, time in business or credit score requirements. You’ll have to contact the lender directly to see if you qualify.

However, the company does publish its typical consumer profiles, which can give you some idea of what to expect. Their average business acquisition loan customer has nine years in business, a personal credit score of 771 and receives $238,000 in loan funds.

See Your Business Loan Offers

PNC Bank: Best for large loan amounts

$10,000,000 to $1,000,000,000

Not disclosed

Up to 60 months

Pros
  • Very large loan amounts (Up to $1,000,000,000)
  • PNC offers multiple business banking products, including bank accounts and credit cards.
  • Offers advisory services specific to acquisition
Cons
  • Lack of transparency around interest rates
  • Lack of transparency around eligibility criteria
  • Loans require collateral

Why we picked it

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If you need to borrow a large amount of money, PNC has you covered. The bank’s corporate and institutional lending division offers loan amounts extending to $1,000,000,000. As an added bonus, the bank also offers advisory services for those going through the acquisition process.

Still, at just 60 months, PNC’s average loan term is relatively short when you consider its massive loan amounts. Additionally, its corporate lending department only offers secured loans, which means you’ll have to put up some form of collateral in order to be approved for the loan.

If you’re a smaller business, PNC also offers unsecured loans up to $100,000 and secured loans starting at $3,000,000. The bank’s small business secured loans have a slightly longer timeline of up to 7 years.

Read our full PNC Bank review.

How to qualify

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PNC Bank doesn’t disclose its eligibility criteria, including its minimum annual revenue, time in business or credit score requirements. You’ll have to contact the lender directly to see if you qualify.

See Your Business Loan Offers

Bank of America: Best for streamlined finances

Not disclosed

6.50% secured, 6.75% unsecured

12 to 60 months

Pros
  • Offers a wide variety of business banking products
  • Provides interest rate discounts for veterans and Preferred Rewards members
  • Competitive starting interest rate
Cons
  • Doesn’t disclose its maximum loan amount
  • Not transparent about maximum rate ranges
  • May need to apply over the phone or in person

Why we picked it

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If you want to be able to do all your business banking in one place, consider a term loan from Bank of America. The bank offers plenty of business products, including both secured and unsecured financing, allowing it to become a one-stop shop for all your business needs. Plus, with relatively low starting rates and potential discounts for Preferred Rewards members and veteran business owners, borrowing could be relatively affordable.

That said, like many big banks, Bank of America isn’t the most transparent. It doesn’t disclose its maximum loan amounts or maximum rate ranges, which can make it hard to tell if this bank is a good fit for your business. Additionally, you may need to apply over the phone or in person for some services.

Read our full Bank of America review.

How to qualify

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In order to qualify for an unsecured term loan, you’ll need to meet Bank of America’s criteria of:

  • Minimum credit score: 700
  • Minimum time in business: 24 months
  • Minimum annual revenue: $100,000

Secured term loans don’t have a stated minimum credit score, but they do require at least 24 months in business and $250,000 in annual revenue.

See Your Business Loan Offers

iBusiness Funding: Best for quick loans

$500,000

7.49%

6 to 60 months

Pros
  • Fast funding times of as little as 2 to 4 days
  • Long repayment windows (up to 60 months)
  • No prepayment penalty
Cons
  • Charges a steep late payment fee (5% of the loan payment amount)
  • Requires a personal guarantee and a UCC-1 filing.
  • Longer time in business requirement

Why we picked it

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If you need quick financing, think about using iBusiness Funding for your business acquisition loan. This company boasts that it’s able to provide end-to-end funding in as little as two to four days. What’s more, you’ll have up to 60 months to repay what you’ve borrowed.

At the same time, though, this lender imposes a strict 24-month time in business requirement, meaning that it’s likely not a fit for startups. It also requires both a personal guarantee and a UCC-1 filing to secure the loan.

Read our full iBusiness Funding review.

How to qualify

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In order to qualify, you’ll need to meet iBusiness Funding’s criteria of:

  • Minimum credit score: 640
  • Minimum time in business: 24 months
  • Minimum annual revenue: $50,000
See Your Business Loan Offers

Fundible: Best for microbusinesses

Up to $500,000

7.00%

Up to 24 months

Pros
  • Smaller lines of credit can fund as soon as the same day
  • No prepayment penalties
  • Potential to graduate to a different loan program in the middle of your loan term if you’re in good standing
Cons
  • May require a UCC-1 filing
  • May share your info with third-party lenders
  • Fundible’s website uses monthly interest rates rather than an APR, making it difficult to compare against other lenders

Why we picked it

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Microbusiness owners, like food truck operators or online entrepreneurs, may find that Fundible’s business line of credit suits their needs. Line of credit amounts go up to $500,000, but if you borrow less than $250,000, you’ll have the option to access same-day funding.

However, be aware that it can be difficult to understand Fundible’s available loan terms and rates because the company’s representatives often give conflicting information to what’s on its website. You’ll also need to be prepared to have a UCC-1 lien against your business.

Read our full Fundible review.

How to qualify

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In order to qualify, you’ll need to meet Fundible’s criteria of:

  • Minimum credit score: 600
  • Minimum time in business: 6 months
  • Minimum annual revenue: $96,000
See Your Business Loan Offers

What is a business acquisition loan?

A business acquisition loan is a loan that’s used to buy an existing business, buy out a business partner, open a franchise or purchase assets from another company.

Traditional banks, credit unions and online lenders offer various small business loans that cover acquisition expenses, such as purchasing equipment, setting up an office space, transferring business ownership or opening additional brick-and-mortar retail shops.

You can also get a business acquisition loan to cover startup costs and working capital expenses while you get things up and running.

On this page

4 types of business acquisition loans

There are multiple ways to finance a business acquisition, including non-SBA business acquisition loans. Options include:

1. SBA loans

Backed by the Small Business Administration (SBA), the SBA 7(a) loan is a popular option for purchasing a business or franchise. If you meet the SBA loan requirements, you can borrow up to $5 million with competitive interest rates and terms up to 25 years.

Although the SBA oversees the SBA loan program, you must apply directly through a bank or online lender offering SBA funding. You will likely need to provide a down payment of 10% to 30% when securing acquisition financing.

Note that SBA loans have an extensive approval and funding timeline — approximately 30 to 60 days or up to 90 days for commercial real estate loans. You can reduce this time to as short as two weeks or less by working with an SBA-preferred lender.

SBA 7(a) variable loan interest rates

Loan amountRate standard Variable maximum allowable (with current 7.50% prime rate)
$0 to $50,000Base* + 6.5%14%
$50,001 to $250,000Base* + 6%13.5%
$250,001 to $350,000Base* + 4.5%12%
$350,000 or aboveBase* + 3%10.5%

*Variable interest rate 7(a) loans are pegged to the prime rate (currently at 7.5%), the LIBOR rate or the SBA optional peg rate.

2. Term loans

Traditional term loans can be another great way to fund business acquisitions and franchise purchases. Banks, credit unions and online lenders provide term loans with a lump sum upfront at fixed or variable interest rates. Borrowers with good to excellent credit scores are more likely to secure lower interest rates with more flexible repayment terms.

Short-term business loans can typically provide between $2,000 and $1.5 million or more, with repayment terms ranging from three to 24 months. If you need more breathing room with your debt repayment schedule, long-term business loans offer terms of up to 10 or more years.

Requirements for term loans vary by lender but typically require your business to operate for six to 24 months with around $36,000 to $250,000 in annual revenue. You may also need to provide collateral or sign a personal guarantee to reduce lender risk.

3. Startup loans

In the early stages of launching their businesses, new entrepreneurs and business owners can apply for startup business loans to help fund acquisition expenses and projects.

While some traditional banks provide startup financing, you may have better luck gaining approval with an alternative lender. In general, private business lenders have more lenient eligibility requirements than other types of business financing, with options available to companies after only six months in operation.

4. Equipment financing

Equipment financing could be a great option if you need help purchasing equipment from another business owner during the acquisition process. Since the equipment acts as collateral to reduce lender risk, equipment financing is typically available to a range of business owners like startups, low-credit borrowers or those with limited revenue.

You can also explore equipment leasing if you have short-term equipment needs or are tight on cash.

 Acquiring a business as a first-time business owner: Seller financing

If you’re buying your first business, you may have some trouble borrowing enough money to fund the acquisition. While some lenders and loan types will work with first-time entrepreneurs, many lenders impose strict time in business requirements.

As the name suggests, a time in business requirement sets benchmarks around the amount of time your business needs to have been in operation in order to receive financing from the lender. Put simply, loans with these requirements are suited to people who already own an established business and are acquiring a new one.

Fortunately, though, there are other options, including seller financing. While not all sellers will agree to a seller financing arrangement, it’s an option to consider if you can’t qualify for another type of business acquisition loan.

How does seller financing work?

Seller financing allows the business’s former owner to act as your lender. With this type of financing scenario, you’ll negotiate terms with the seller directly. Once both parties sign off on an agreement, you’ll likely make a large down payment, plus a series of regular payments to the seller over a number of years until you’ve paid off the business’s sale price in its entirety.

If you’re interested in seller financing, you can talk to the seller or their agent or look for businesses that mention seller financing in their ads.

Pros and cons of acquisition financing

While acquisition financing can help many business owners acquire new companies or expand with a franchise, it’s essential to weigh the pros and cons to see if it’s a good fit for your situation.

ProsCons
May have flexible collateral requirements. While some lenders require collateral like real estate, inventory or equipment to secure the funds, not all loans require it.

Offers long-term solutions. With a wide range of business acquisition finance options available, you can pick the term that best suits your company’s budget and cash flow needs.

Includes options for fast funding. Many lenders offer quick business loans that can approve and deliver your funds within two to four business days.		 Qualification criteria can be strict. Lenders may focus more heavily on your credit scores and company’s cash flow when applying for a business acquisition loan, especially for unsecured loans.

Interest rates can affect your bottom line. Newer businesses and startups might end up paying higher rates since they pose a greater risk to lenders.

May have stipulations or restrictions. Depending on the loan type and lender, you might have to follow specific rules. For example, the SBA 7(a) loan requires that the previous owner doesn’t maintain any stake in the business and that you’ve exhausted other financing options before pursuing this option.

How to get a loan to buy a business

To get a business acquisition loan, you’ll need to:

1. Evaluate the business’s worth

Requesting a business valuation can determine a company’s worth, helping lenders assess how much capital they feel is appropriate. For example, you might have difficulty convincing a lender to approve your $350,000 acquisition loan if the business you want to purchase has a value of only $15,000. In contrast, buying a business valued over $100,000 with a steady income stream could reassure lenders that you can likely handle the loan payments.

While business valuations can be calculated in different ways, here are three popular options:

  • Market-based valuation: This method compares your business to similar companies in your industry and works best when your services, prices and operations are standard for your industry.
  • Asset-based valuation: This approach requires a deeper analysis of a business’s assets and its net worth. A restaurant, for example, may have expensive kitchen appliances, shatter-resistant dishes, pricey booths and tables and a large inventory of vintage wine.
  • Income-based valuation: Here, the focus is on how much cash flow your business might generate in the future. While there’s no way to assure this, a solid financial history with an upward projection for revenue is a good sign for lenders.

2. Get a signed letter of intent

It’s common practice for the buyer and the business seller to sign a letter of intent outlining the specific steps both parties will take to move forward with the arrangement.

While a letter of intent may not be legally binding, it can show lenders you’re serious about moving forward with the sale. Lenders may hesitate to approve your business acquisition loan if it seems like you and the seller aren’t on the same page.

An attorney can help draft an SBA or standard letter of intent, which both parties will sign.

3. Review your credentials

While specific business loan requirements can vary by lender and loan type, lenders typically review the following criteria when assessing your loan application:

  • Credit score: Having a good personal and business credit score can increase your chances of getting approved for a business acquisition loan. While some lenders accept scores as low as 600, a higher score will likely unlock better rates and more flexible terms.
  • Time in business: Many lenders require your company to operate for at least one to two years before you can qualify for business acquisition financing, making this a better option for an existing business owner purchasing a second business or buying out a partner.
  • Annual revenue: Lenders generally want to see your company generating a steady cash flow to reassure them you can handle debt repayments. While having an annual revenue of around $100,000 or higher could strengthen your loan application, lenders like Taycor Financial don’t impose minimum revenue requirements.

4. Compare lenders

After finding business acquisition lenders that fit your criteria, you can dive deeper to learn about their fees, rates, customer support and more. Reading business lender reviews in advance can help ensure a lender is legit before you sign the dotted line. Some lenders also offer perks, like free business coaching, rewards programs and early payoff discounts.

5. Gather necessary documents

Organizing your business paperwork in advance can help ensure you have everything you need before applying. While exact requirements vary by lender, here are some common loan documents many lenders require:

  • A recent business valuation
  • Recent tax returns for the business you’re planning on purchasing
  • A current profit and loss (P&L) statement from the existing business
  • A proposed bill of sale, which must include the terms of sale
  • The asking price and the schedule of inventory, equipment and furniture
  • Projected financial statements, detailing a one-year income projection with a written explanation of how you plan to reach it
  • Information about the business’s ownership and any affiliations
  • Copies of business certifications and licensing
  • Your personal and business tax returns from the previous three years
  • A business plan outlining how you plan to use the funds

6. Apply and review offers

You can usually submit a business acquisition loan application online, although some traditional banks may require an in-person visit to finalize the paperwork.

If approved, make sure to thoroughly review the business loan agreement before moving forward. Now is the time to ask questions about repayment schedules, interest rates, additional fees and acceptable ways to use the funds.

See Your Business Loan Offers

How to choose a business acquisition loan

There are numerous options to choose from when looking for a loan to buy an existing business or a franchise. Here is a breakdown of what to consider when comparing your financing options.

 Interest rate: While rates will vary based on your personal and business qualifications, shopping around can help you find the deal that best fits your budget.

 Repayment term: Picking a longer term can help make your monthly payments more manageable, but you will likely end up paying more interest over the long run. If your budget can afford it, opting for a shorter term can save you more.

 Time to fund: Ask the lender how long it typically takes to have funds deposited into your account. If you need access to capital fast, going with an alternative lender can help you save time. In contrast, an SBA loan to buy a business could take several months to process.

 Additional fees: Some lenders and loan types, such as the SBA 7(a) loan, charge additional fees. These can include origination fees, late payments and business loan prepayment penalties.

 Collateral: Some business acquisition loans are secured business loans, meaning you must secure them with collateral, such as equipment, real estate or cash. If you fail to repay the debt, the lender could seize your collateral to repay the debt.

Alternatives to business acquisition financing

A loan isn’t your only option when looking to purchase a business or franchise. Other financing options include:

  • Lines of credit: If you want access to funds on a revolving basis, a business line of credit could provide up to $250,000 or more, with interest only applied to the funds you withdraw. While this might not be enough to purchase a business outright, it can help cover some basic costs when getting started.
  • Venture capital: Another option for funding an acquisition purchase is venture capitalism, which is where investors contribute funds in exchange for a piece of ownership in the business. While you don’t have to pay interest or repay the investment, you essentially give up a portion of your business’s equity.
  • Crowdfunding: You can collect donations from friends, family and the general public via a crowdfunding platform, like Kickstarter or Fundable. While crowdfunding platforms typically deduct a small fee for their services, you don’t have to pay anything to run a campaign and receive donations.
  • Small business grants: A range of small business grants are available through state and federal government agencies and private corporations, which could help cover some of the costs of buying an established business.

How we chose the best business acquisition loans

We looked at over 35 lenders when searching for the best business acquisition loans. To make the cut for our best picks, the lenders we chose had to meet the following criteria.

  • Loan use: Not all lenders allow their small business financing to be used for acquisitions. We prioritized lenders who offer products specifically meant for buying a new business.
  • Loan amount: Buying a business is typically very expensive. We looked toward lenders who would be able to provide large enough loan amounts to complete a sizable transaction.
  • Interest rate: We focused on finding lenders who offer affordable interest rates on their loan products.

Frequently asked questions

It depends on the loan type and what your score is.
 
Lenders typically require personal credit scores in the mid- to high-600s to qualify for business acquisition financing, while SBA lenders like to see scores of 650 or higher. Some alternative lenders offer bad credit business loans to borrowers with scores as low as 500, with funds covering a range of business acquisition expenses. However, these loans tend to come with higher interest rates and less favorable repayment terms.

It depends on your qualifications, the valuation of the company you want to buy and the type of business loan. For example, SBA 7(a) loans can go up to $5 million, while term loans typically range from $2,000 to $1.5 million.
 
Our business loan calculator can estimate your potential borrowing power to help you explore options.

It’s possible, but generally you’ll need at least some money to put down. Providing a down payment for your business acquisition loan can help improve your chances of approval while helping unlock better rates and more flexible repayment terms.
 
There are financing options for startups with no money, such as equipment financing, accounts receivable financing, microloans and credit cards. While some of these options could help fund business acquisitions, or cover part of the expenses, they’re typically better suited for general working capital costs.