Best Business Acquisition Loans 2020

Business acquisition loans make it possible to buy a business, even if you don’t have the cash on hand. But just as you did a lot of careful thinking and math before deciding to buy a business, you need to choose your lender wisely.

We wanted to make your acquisition funding process easier, so we’ve rounded up the best business acquisition loans. We’ll tell you about the lenders that offer them and explain why you’ll like them (and why you won’t).

With any luck, you’ll have a new loan―and more importantly, a new business―in no time.

Lendio: Best overall

We can sum up why Lendio is our favorite source for business acquisition loans in just two words: lending marketplace.

You see, Lendio isn’t a lender―it’s a lending marketplace. And just like a supermarket lets you compare different brands and prices of similar products, Lendio lets you compare different loan offers. Just fill out a Lendio application, and it will match you with lenders. If all goes well, you’ll get a list of business acquisition loan offers. Then you just have to decide which to go with.

Lendio works with a bunch of different lenders, including some we review below. That said, it doesn’t partner every lender out there. So while Lendio does let you compare your options, you theoretically could get a better offer from a different lender. If that’s a concern, though, you can always compare Lendio offers with offers from other lenders.

With the potential for large loans and low rates, Lendio’s lending marketplace is the perfect place to do some comparison shopping for your business acquisition needs.

SmartBiz: Best for SBA loans

Just like Lendio, SmartBiz is a lending marketplace. But unlike Lendio, SmartBiz specializes in SBA 7(a) loans.

If you’re not familiar with those, here’s a quick recap: The U.S. Small Business Administration, or SBA, offers loan programs for business owners. It doesn’t extend the loans itself, but rather, it backs them so lenders can confidently lend to businesses. Participating lenders have to agree to some strict rules, including an interest rate cap and a minimum loan term length. Put simply, that makes SBA 7(a) loans a good deal.

But applying for SBA loans can get complicated (and take forever). Thankfully, SmartBiz has tried to make the process easier. Plus, it lets you compare SBA loan offers to make sure you’re getting the best possible deal. And with those low rates and long terms we mentioned, SBA-backed loans make the perfect funding option for business acquisition.

In other words, if you’re thinking of going the SBA route to buy a business, then start your search at SmartBiz.

Funding Circle: Best peer-to-peer loans

Want bank-like interest rates without the bank? You might find what you’re looking for at Funding Circle.

Funding Circle operates via peer-to-peer (P2P) lending, rather than direct lending. That means the money you get actually comes from individuals rather than Funding Circle itself. You won’t notice much difference as a borrower, though. You’ll still apply and make payments through Funding Circle. But thanks to the magic of P2P lending, you just might get very competitive interest rates.

Now, to be clear, Funding Circle doesn’t offer specific business acquisition loans. It just offers one type of term loan, which you can use for a bunch of things―including buying another business. And thanks to its low rates and long(ish) terms, we felt it still deserved a place on this list.

So if you’re interested in low interest rates on your business acquisition financing, Funding Circle’s peer-to-peer lending can offer just that.

Bank of America: Best for practice acquisition

Are you specifically interested in buying a medical practice of some sort? Bank of America has you covered.

Bank of America offers practice financing for dentists, optometrists, physicians, and veterinarians. That financing includes commercial real estate loans, business lines of credit, equipment loans, and―you guessed it―acquisition loans. So depending on what you qualify for, you might be able to buy your business, get new equipment, and keep working capital available, all through Bank of America.

Since it’s a traditional bank, Bank of America has very low starting interest rates. And if you participate in its rewards program (explained in our Bank of America review), you can lower your rates even further. Not a bad deal, right?

Entrepreneurs with businesses in other industries can use Bank of America’s other financing options to help fund their business acquisition―but it’s medical practice loans where Bank of America really shines.

OnDeck: Best for smaller acquisition loans

While OnDeck isn’t our first choice for business acquisition loans, it can work well for smaller financing needs.

Why do we say that? Well, OnDeck has higher starting interest rates than the other lenders on this list. That makes it less appealing for business acquisition loans, which can often be quite large. A large loan with a high interest rate can easily become an overwhelming expense.

On the other hand, OnDeck is a true alternative lender, complete with looser borrower requirements that you’ll find from most traditional financial institutions (banks and credit unions). In fact, it has the lowest application criteria of any lender on this list. That makes it more accessible.

So rather than write off OnDeck entirely, we recommend you use it only for smaller business acquisition loans. That way, the interest (while high) won’t be so killer.

Applying for a business acquisition loan

Keep in mind that unlike some types of loans, true business acquisition loans can take a while to qualify for. In other words, you shouldn’t expect the 24-hour turnaround that many online lenders advertise these days. The business acquisition financing process can easily take weeks.
(If you’re using a generic loan, like one from Funding Circle or OnDeck, this may not be true.)

One reason for that? Your lender has to evaluate both you (and your business) and the business you’re buying. After all, a lender doesn’t want to give you a large loan for a sickly business that won’t last long.

Prepare for your lender to ask for plenty of details about the business you’re buying, including financial reports and projections―all in addition to the details it will want about you, of course.

These are a few of the things your lender will likely look at with your loan application:

• Your personal credit score/credit history
• Your business credit score
• Financial statements (including balance sheets and bank statements)
• Collateral you’re offering
• Business assets included in the acquisition
• Cash flow at your existing business
• Existing business financing debt

Other business acquisition financing options

What if you can’t―or don’t want to―use business acquisition loans to buy a business? In that case, you have some other options to consider.
You can fund your purchase with other business loans and lines of credit. (Check out our rankings of the best small-business loans to find some good options.)

Just remember that many working capital loans and lines of credit (including short-term business loans, invoice financing, and other common finance options) have low credit limits, high interest rates, and short repayment terms―all of which make them less-than-ideal for business acquisition. Still, they can work, especially if you don’t need a large amount.

Likewise, you can use personal loans to buy a business. Similar caveats apply here: personal loans are often designed for smaller purchases, and you’ll often pay more in interest.

You can also ask the party you’re buying from if they’d offer seller financing, also called owner financing. With seller financing, the seller and the buyer draw up a financing agreement between themselves―including interest, repayment terms, etc.―and the buyer agrees to repay the money over time. Think of it like a more legal IOU.

If you have a well-funded retirement account, such as a 401(k), you have the option of financing a business purchase with Rollovers as Business Startups (ROBS). A ROBS allows you to use your existing retirement money to fund your business, but it requires some kind of complicated legal steps to do. You don’t have to pay interest on a ROBS (it’s not a loan), but you will have to pay some high fees. If you’re considering this option, talk with an attorney ASAP.

A home equity line of credit (HELOC) gives you another way to use your existing assets to fund your business purchase. If you have a house, and you have equity in that house, you may qualify for a HELOC. Your house will serve as collateral for the credit line, and your credit limit will be tied to the amount of equity you have.

Don’t qualify for a business loan? Get a personal loan instead.

The takeaway

Acquiring a business may never be easy, but the lenders above can at least get you the capital you need. And between dedicated small-business acquisition loans and versatile conventional loans, you’ve got options to choose from.

Enjoy your new business!

Make sure you’re qualified for business acquisition loans (and other types of business financing) by learning more about how your personal credit and your business credit affect your creditworthiness.

Disclaimer

At Business.org, our research is meant to offer general product and service recommendations. We don’t guarantee that our suggestions will work best for each individual or business, so consider your unique needs when choosing products and services.

Sources

1. BizBuySell, “BizBuySell Insight Report”