A business acquisition loan is used to purchase an existing business, become a franchise owner, buy out a business partner or purchase another company’s assets. Depending on the lender and loan program, business acquisition loans may be structured
To most lenders, business acquisition loans are less risky to fund because there is a tangible asset on the other end with a financial history. An existing business may provide lenders with an established operating history, financial statements and cash flow to evaluate. Depending on the loan structure, business assets and other collateral may also be used to secure the financing.
Benefits of Acquiring an Existing Business
Purchasing an existing business is commonly known as a turnkey strategy—the idea that all you need to begin operations is to turn the key and open your doors. While that is not the case for every business acquisition, purchasing an existing business offers benefits that are appealing to the entrepreneur.
Existing Supply Chain
Securing reliable vendors can be especially tricky to the new business owner. By acquiring a business, you are also acquiring all established relationships with contracts and vendors.
Equipped with Staff that Knows the Business
Seasoned employees offer valuable insight on market cycles that have allowed the business to stay afloat. Your business intelligence also helps companies thrive when it is paired with staff who are already trained in the business.
Immediate Cash Flow
You are buying into an established cash flow. Unlike new businesses or startups, buying a business will provide an established operating history and, in many cases, existing revenue and cash flow from day one.
Business acquisition loans are typically term loans, and while each lender has its own qualifications for the approval process, here are some key details that will be required of you.
- A financial evaluation of the business
- A letter of intent
- Identifiers of your qualifications
- Sales or franchise agreement
- Business financial statements and tax returns
- Contracts and leases
The Small Business Administration (SBA) has specific guidelines for business acquisition loans including requirements for debt-service coverage ratio (DSCR), underwriting, and deal structure that business owners should be aware of before choosing a loan product.
Frequently Asked Questions
What is a business acquisition loan?
A business acquisition loan is used to purchase an existing business, become a franchise owner, buy out a business partner or purchase another company’s assets.
What are the SBA changes to change ownership guidelines?
As of October 1, 2026, a new Standard Operating Procedure goes into effect at the Small Business Administration (SBA) The updates focus heavily on change of ownership guidelines, including the purchase of an existing business, owner buyouts, and certain business expansion transactions.
What are the benefits of acquiring an existing business?
The benefits of acquiring an existing business are entering a business with an existing supply chain, staff that is familiar with operations, and an immediate stream of cash flow.
What do you need for a business acquisition loan?
Each lender has its own qualifications for a loan, however in most cases you will need a financial evaluation of the business, a letter of intent, identifiers of your qualifications, sales or franchise agreement, financial statements, tax returns, contracts, and leases.