Financing Your Small Business Acquisition

by | February 27, 2014

Blog written by Alicia Johnston, MBA,  Wells Fargo SBA

Northwest or northeast, urban or rural, service business or manufacturing – when it comes to choosing your small business financing, the direction you choose will impact the business’ capacity for growth. Finding and financing a business acquisition can be a seamless process, as long as you know what to expect.

Whether you are buying out a partner or acquiring a new business it’s important to evaluate the business’ short- and long-term financing needs.  The next step is to contact a business broker or business attorney to provide the expertise needed for success. If you haven’t already established a relationship with a broker or attorney, you can find broker contact information on corresponding business listings.  One excellent alternative is to get a referral or recommendation from another small business owner, colleague or attorney.

Next, attorney or business broker will introduce you to a Small Business Administration lending officer, helping to expedite the approval process. Most Small Business Administration (SBA) officers can pre-qualify a small business customer for an acquisition – providing for flexible, timely decision making assistance.

The SBA is the largest source of long-term small business financing in the nation. Small businesses have several advantages in financing acquisitions through SBA lending, which include:

  • A lower down payment – a 15-25 percent down payment allows a buyer to conserve valuable operating capital to expand inventory or hire additional workers.
  • Longer loan terms – repayment terms depend on the use of the proceeds; terms extend up to 10 years with both variable and fixed rate options available in most cases.

Finding a financial institution that is designated as an SBA preferred lender also offers significant advantages. Preferred lender status denotes a bank’s loan review and approval process and these lenders can approve loan applications without having to submit the loans to the SBA for approval.

Wells Fargo is a preferred SBA lender.  As your attorney or business broker and SBA Lending officer work together to coordinate a flawless transaction, all that’s left for you to do is introduce yourself to your new employees.