How much do you need?
We’ll start with a brief questionnaire to better understand the unique needs of your business.
Once we uncover your personalized matches, our team will consult you on the process moving forward.
Here are 6 business acquisition loan options
Lender | NerdWallet Rating | Max loan amount | Min. credit score | Next steps |
|---|---|---|---|---|
TAB Bank - Term loan with Fundera by NerdWallet | Best for Bank small-business acquisition loans | $200,000 | 650 | with Fundera by NerdWallet |
SBA 7(a) loan with Fundera by NerdWallet | Best for SBA business acquisition loans | $5,000,000 | 650 | with Fundera by NerdWallet |
SBA Express loan with Fundera by NerdWallet | Best for SBA business acquisition loans | $500,000 | 650 | with Fundera by NerdWallet |
Funding Circle - Online term loan with Fundera by NerdWallet | 5.0/5 Best for Online business acquisition loans | $500,000 | 660 | with Fundera by NerdWallet |
Credibility Capital - Online term loan with Fundera by NerdWallet | 4.5/5 Best for Online business acquisition loans | $500,000 | 650 | with Fundera by NerdWallet |
Triton Capital - Equipment financing with Fundera by NerdWallet | 4.0/5 Best for Business acquisition loans for equipment | $250,000 | 600 | with Fundera by NerdWallet |
Here are 6 business acquisition loan options
Best for Bank small-business acquisition loans
Best for SBA business acquisition loans
Best for Online business acquisition loans
Best for Business acquisition loans for equipment
Our pick for
Bank small-business acquisition loans
TAB Bank - Term loan
with Fundera by NerdWallet
Max Loan Amount
$200,000
Min. credit score
650
Est. APR
8.99-35.99%
TAB Bank offers competitive interest rates for business owners with strong credit — and can sometimes fund faster than an SBA loan.
Max loan
$200,000
Min. Credit score
650
Apr range
8.99-35.99%
with Fundera by NerdWallet
Our picks for
SBA business acquisition loans
SBA 7(a) loan
Max Loan Amount
$5,000,000
Min. credit score
650
Est. APR
10.00-12.50%
7(a) program participants include specialized lenders like Live Oak Bank and big-name traditional banks like Wells Fargo.
Lowest interest rate
Max loan
$5,000,000
Min. Credit score
650
Apr range
10.00-12.50%
SBA Express loan
Max Loan Amount
$500,000
Min. credit score
650
Est. APR
12.25-14.25%
SBA Express loans are available up to $500,000 as either a term loan or line of credit.
Max loan
$500,000
Min. Credit score
650
Apr range
12.25-14.25%
Our picks for
Online business acquisition loans
Funding Circle - Online term loan
Max Loan Amount
$500,000
Min. credit score
660
Est. APR
5.99-16.49%
Funding Circle is an option for established businesses that are financing an expansion or refinancing debt.
May fund quickly
Max loan
$500,000
Min. Credit score
660
Apr range
5.99-16.49%
Credibility Capital - Online term loan
Max Loan Amount
$500,000
Min. credit score
650
Est. APR
9.49-15.49%
Credibility Capital offers low-cost business loans that work best for small-business owners with strong credit.
Max loan
$500,000
Min. Credit score
650
Apr range
9.49-15.49%
Our pick for
Business acquisition loans for equipment
Triton Capital - Equipment financing
4.0
NerdWallet rating with Fundera by NerdWallet
Max Loan Amount
$250,000
Min. credit score
600
Est. APR
5.99-35.00%
Triton Capital offers fast equipment loans up to $250,000 for businesses in a range of industries.
4.0
NerdWallet rating Max loan
$250,000
Min. Credit score
600
Apr range
5.99-35.00%
with Fundera by NerdWallet
Minimum requirements for a loan
The Nerds are here to help you find the right loans for your business needs.
Credit Score
550 or higher
Annual Revenue
at least $50k
Time in Business
6 months or more
How Much Do You Need?
Business acquisition loans are typically structured as term loans, in which you repay the borrowed funds, with interest, over a set period of time. Loan amounts, interest rates and repayment terms vary by lender.
Although you may ask for a specific loan amount, some lenders will only offer you a percentage of funding — and require that you supply the remaining percentage as a down payment. Down payments on business acquisition loans can be as little as 10% or as much as 30% depending on the type of financing, lender and your business’s qualifications.
Lenders typically rely on a business valuation — an evaluation of the economic value of the company you’re looking to buy — among other factors, when determining the loan amount to offer.
Collateral may also be required to secure your financing. In some cases, tangible assets from the company you’re looking to purchase can serve as collateral on the loan.
Pros
- Lessens the upfront costs associated with your acquisition. Instead of relying exclusively on your existing capital reserves or personal savings, a business acquisition loan can help cover some of the costs associated with purchasing another company. You can utilize these funds as necessary and pay them back over time. Plus, these loans typically have long terms and a monthly payment schedule — making it easier for you to manage repayment while building your new business.
- Collateral requirements may be flexible. If you’re hesitant to put your physical assets at risk, some acquisition loans may not require collateral. SBA 7(a) loans, for example, don’t require collateral for loan amounts under $25,000. In addition, equipment financing doesn’t typically require collateral because the equipment itself serves as collateral on the loan.
Cons
- Can be hard to qualify. Because you’re looking for a loan to purchase another company, lenders want to see that you are reliable, experienced and have the ability to repay your debts. As a result, they often require that you have good credit, strong finances and an established business background. Many lenders also require a down payment — and some require collateral, although this isn’t always the case. Some lenders may be willing to work with borrowers with bad credit, but they’ll also charge higher interest rates.
- Interest costs may impact your bottom line. Although you can use your business acquisition loan to cover the costs of purchasing and running another company, you’ll also be making repayments, which includes interest, while trying to get started. These interest costs can quickly add up — especially if you’re struggling to maintain a stable cash flow. And loans with higher interest rates may make it even more difficult to manage payments along with additional startup costs.
Business acquisition loans are available from a variety of sources, including:
Banks and credit unions
Banks and credit unions can offer acquisition loans with low interest rates and long terms for businesses that can qualify and don’t need cash fast.
To qualify for a business bank loan, you’ll typically need strong personal credit (a score of 700 and up), several years in business and excellent finances. Not all banks or credit unions require physical collateral, but offering this type of security may help you access larger loan amounts and lower interest rates.
However, these small-business loans can be slow to fund and often require lengthy application processes.
SBA lenders
SBA loans are issued by participating lenders, usually banks and credit unions, and are partially guaranteed by the U.S. Small Business Administration. These loans have flexible terms, low interest rates and can be used for various types of business acquisitions. However, like traditional bank loans, SBA loans have strict requirements and can be slow to fund.
To qualify for an SBA loan, you’ll typically need strong annual revenue, at least two years in business and a personal credit score of 690 or higher — although some SBA lenders may have lower credit score requirements.
You’ll also likely need to provide a down payment of at least 10% of the total loan amount when using an SBA loan for a business acquisition. In some cases, you may need to provide additional collateral.
Standard SBA 7(a) loans can take anywhere from 30 days to a few months to fund. As an alternative, SBA Express loans offer a faster funding time, but they also have smaller loan amounts and slightly higher interest rates.
Online lenders
If you need funding faster — or don’t qualify for an SBA or bank loan — consider a business acquisition loan from an online lender. Online lenders such as Funding Circle and Credibility Capital offer acquisition loans in amounts up to $500,000 and terms up to seven and five years respectively.
Online lenders generally have less strict requirements compared to banks and credit unions. You may be able to qualify for a business loan with fair credit (a FICO score of 630 to 689), and you may not be required to provide physical collateral. Online lenders may also be more likely to work with less-established businesses, especially if they have strong finances.
And whereas bank and SBA loans may take weeks to fund, online business loans can often be funded in just a few days. Credibility Capital, for example, can offer financing in as fast as three days. Online lenders typically charge higher APRs than traditional lenders — the tradeoff for easier approvals and speed.
If you’re looking to buy a business, you may have funding options outside of traditional term loans, such as:
- Equipment financing. If your business acquisition includes equipment, you might use an equipment loan to finance part of your purchase. Or if you’re buying a business that relies heavily on equipment, such as a construction business, you may be able to find an equipment loan to cover a majority of the costs. With equipment financing, the equipment itself serves as collateral on the loan.
- Seller financing. With seller financing, you’re borrowing the capital you need to purchase the business directly from the current owner. You work with the owner to create an agreement regarding terms and interest and then repay the owner directly. This type of arrangement might be easier than working with a third-party lender, if the seller is willing to offer it.
Check your qualifications
Every lender has different eligibility requirements, but they typically use similar criteria to underwrite your business for a loan, including your personal credit score, annual revenue and time in business. Lenders also consider your cash flow, ability to repay the debt and the collateral you’re able to offer.
You should review these standard business loan requirements so that you have a sense of where you stand before applying.
Prepare your acquisition information
When acquiring an existing business, lenders will also consider the value of the company you’re looking to buy, the down payment you can provide, your business plan and financial projections for the acquisition, as well as your experience in the industry.
It’s important to prepare any acquisition information ahead of time to help expedite your loan application. You should conduct a business valuation, if necessary, and have the paperwork detailing the estimated value of the company you’re looking to purchase. You can also get a signed letter of intent with terms of sale between you and the current owner of the business.
You might consider working with a business accountant and a business attorney to assist you through this process. These professionals can help you evaluate the costs of purchasing a business, perform a business valuation and draft important documents related to the acquisition.
Complete your application
As part of the application process, you’ll need to provide financial documents like cash flow statements, profit and loss statements, tax returns and business and personal bank statements.
The lender will likely ask for additional documentation such as:
- Financial statements for the business you’re purchasing.
- A business plan.
- Post-purchase sales projections.
- Proof of collateral and/or a down payment.
- A business valuation of the company you’re purchasing.
- A letter of intent with the terms of sale between you and the current owner of the business.
For a look beyond business acquisition loans, check out NerdWallet’s list of the best small-business loans to see and compare options.
Our recommendations are based on the market scope and track record of lenders, the needs of business owners and an analysis of rates and other factors, so you can make the right financing decision.
Last updated on September 30, 2022
Frequently Asked Questions
It will be more difficult to get a business acquisition loan if you have bad credit. You’ll typically need good personal credit, along with strong finances, to qualify.
Some online lenders, however, may be willing to work with bad credit borrowers. You may also increase your chances of approval by offering a large down payment and/or significant collateral.
Maximum borrowing amounts for business acquisition loans depend largely on the lender — some online lenders offer up to $500,000, for example, whereas SBA 7(a) loans are available up to $5 million.
The loan amount you’re eligible to borrow varies based on additional factors, including the valuation of the company you’re looking to buy and your business’s qualifications.
It is possible to get a business acquisition loan with no money down. Some online lenders may not require a down payment, especially for self-collateralizing loans, such as equipment financing.
Many other options, like bank and SBA loans, will likely require a down payment. In general, offering a down payment can help you access a loan with better rates and repayment terms.