Everyone dreams of owning business but quite afraid of statistics. While researching, if a newsfeed pops up stating that 50% startup companies fail drastically, you might change your mind and take up a different profession altogether. However, you seriously want to own a business, but don’t want to be in the jungle of failure. Purchasing an already established business might answer your questions proficiently. Businesses with long growth records and growing profits might be a clever choice. The one with massive hard assets, good credit and owner experience are the businesses lenders are likely to finance more. So, buying a well-established business can answer all your doubts completely.
Now, to fund any of your dream business and becoming its own boss, there are some options to follow for financing a current business. Not all funding plans are suitable for everyone. For some, bank loan can be a great option, and others might go for credit union help. The funding type varies from one business to another, and even focuses on buyer’s perspective too. So, keep that in mind!
Purchasing established business using bank loan:
Most of the local banks offer their own Small Business Administration or own products as government backed up loan. If you can present some strong financials for business you are planning to purchase, you can easily get a bank loan approved.
- The better your chosen company’s history is with positive outlook, the higher is your chance to get the bank loan approved. You might even gain a favorable option with low interest rate. But for that, you should have a great credit score of 700+.
- Unless the firm makes significant revenue and selling over $200,000, going for a bank loan may not be a good choice. Furthermore, banks loans are no doubt time consuming, and approval rates seem low. Sometimes, you might be forced to make larger deposit at bank as part of your collateral security.
- In some instances, banks might want the borrower to have any sort of industrial experience in the business he or she is planning to buy. Bonus points for you if you are already operating same business type and making a profit already. It is more like proving the bank right by investing in your project.
Now for the credit union loans:
Credit unions are described as non-profit financial firms, controlled and owned by their own members. They are able to offer loan at lowest interest rates and fees, when compared to banks. They further have flexible lending options for the borrowers. Credit unions will only approve loan if your business idea makes sense. These unions have a personal approach to underwriting as opposed to follow strict guidelines set. If your deal of buying established business is actually making sense, they will make conventional loan.
Primarily, credit unions will have eligibility requirements for members, mainly those working in certain industry, member of military or going to any particular school.
- It definitely offers lower interest rates when compared to banks
- It can be your perfect help while looking for flexible lending requirements
- You have to be a member to apply for the loan
- The process is no doubt time consuming
The field of online business loans:
While planning to purchase established business, you have the right to choose from varieties of online business loans. These business acquisition loans from the reputed online lenders will have streamlined application procedure and with higher approval rates than credit unions and banks. While some of the online lenders will feature lower rate of interest, there are other lenders forcing people to pay higher rate as interest. Therefore, it is mandatory to compare the lender terms and rates quite carefully.
Pros of online lenders:
- It follows streamlined application procedure, which is hard to find in banks and credit unions
- Some online lenders offer lowest interest rates possible and with higher approval rates
Time for the cons:
- You will have higher interest rates with some of the selected lenders. You can avoid it once researched thoroughly.
Next you have online personal loans:
Procuring a personal loan can help you to purchase an existing business quickly. As a fact, personal loans are rather common examples to finance new ventures. Therefore, it is vital to remember that while some personal lenders are open to use the money in any way you like, even for funding a business; there are others, who will simply deny loan applications to entrepreneurs wanting to start new business venture or plan. The application process of personal loan is rather simple. You can enjoy lower interest rates whenever you want, even though some lenders might charge higher rates. Therefore, it is important to shop around a bit.
- Online personal loan is perfect example of streamlined application process
- You will always enjoy a lower interest rate from this source
- Another interesting fact of online personal loan is its high approval rates
- With some lenders, you might have to face higher interest rates
- There are some personal loan lenders, who won’t allow you to use any fund for business purpose
HELOC at your service:
In some instances, it might make some sense to borrow money against your home or property with home equity line of credit, or widely known as HELOC. You can then use this money to buy an established business. According to some experts, home equity loan is one of the major types of loans with best rates. It is good for those with equity.
The interest rate is always towards lower side and terms longer, which makes it rather easy to manage payments well and on time. Stretching payments is also important during early days of business ownership. The interest you will pay on HELOC will be tax deductible.
These important points can literally help you purchase an established business that easily. But first, you should make up your mind after checking pros and cons of each plan. Once you are through with initial research, plunge right into the next step!