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Business Acquisition Loan: Best Options and How to Get One

By Randa Kriss, Edited by Sally Lauckner | Last updated on September 30, 2022
An acquisition loan helps you purchase an existing business. Both traditional and online lenders offer business acquisition loans.

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A business acquisition loan allows you to finance the purchase of an existing business or franchise. You can also use this type of small-business loan to acquire specific assets from an existing company, such as equipment, as well as use it to buy out partners in your current business.
Business acquisition loans are available from banks and credit unions, as well as SBA and online lenders. If you have poor credit, or limited experience as a small-business owner, getting a loan to buy a business may be difficult.
Below, you’ll find our picks for the best business acquisition loans and more information on how to qualify for financing.

How much do you need?

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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

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Make selection

Lender
NerdWallet Rating
Max loan amount
Min. credit score
Next steps

TAB Bank - Term loan

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Best for Bank small-business acquisition loans

$200,000650

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SBA 7(a) loan

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Best for SBA business acquisition loans

$5,000,000650

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SBA Express loan

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Best for SBA business acquisition loans

$500,000650

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Funding Circle - Online term loan

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5.0/5

Best for Online business acquisition loans

$500,000660

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Credibility Capital - Online term loan

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4.5/5

Best for Online business acquisition loans

$500,000650

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Triton Capital - Equipment financing

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4.0/5

Best for Business acquisition loans for equipment

$250,000600

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Here are 6 business acquisition loan options

Best for Bank small-business acquisition loans

TAB Bank

Max Amount

$200,000

Min. Credit Score

650

Best for SBA business acquisition loans

U.S. Small Business Administration

Max Amount

$5,000,000

Min. Credit Score

650

U.S. Small Business Administration

Max Amount

$500,000

Min. Credit Score

650

Best for Online business acquisition loans

Funding Circle

Max Amount

$500,000

Min. Credit Score

660

Credibility Capital

Max Amount

$500,000

Min. Credit Score

650

Best for Business acquisition loans for equipment

Triton Capital

Max Amount

$250,000

Min. Credit Score

600

Our pick for

Bank small-business acquisition loans

TAB Bank - Term loan

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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%

TAB Bank offers competitive interest rates for business owners with strong credit — and can sometimes fund faster than an SBA loan.

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Our picks for

SBA business acquisition loans

SBA 7(a) loan

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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%

7(a) program participants include specialized lenders like Live Oak Bank and big-name traditional banks like Wells Fargo.
Read Review

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SBA Express loan

Read Review

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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%

SBA Express loans are available up to $500,000 as either a term loan or line of credit.
Read Review

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Our picks for

Online business acquisition loans

Funding Circle - Online term loan

5.0
NerdWallet rating 
Read Review

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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
5.0
NerdWallet rating 

Max loan

$500,000

Min. Credit score

660

Apr range

5.99-16.49%

Funding Circle is an option for established businesses that are financing an expansion or refinancing debt.
Read Review

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Credibility Capital - Online term loan

4.5
NerdWallet rating 
Read Review

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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.
4.5
NerdWallet rating 

Max loan

$500,000

Min. Credit score

650

Apr range

9.49-15.49%

Credibility Capital offers low-cost business loans that work best for small-business owners with strong credit.
Read Review

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Our pick for

Business acquisition loans for equipment

Triton Capital - Equipment financing

4.0
NerdWallet rating 

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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%

Triton Capital offers fast equipment loans up to $250,000 for businesses in a range of industries.

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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?

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How do business acquisition loans work?

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 and cons of a business acquisition 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.

Where to get a business acquisition loan

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.

Alternative options for business acquisition financing

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.

How to get a business acquisition loan

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.

Find more business loans

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

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