| Buying a business opportunity is likely to be | | | | |
| an extremely challenging task when arranging | | | | Business Loan Down Payment Requirements for |
| the business loan. This is largely due to the | | | | Buying a Business Opportunity |
| usual lack of commercial property as | | | | |
| collateral for the business financing to buy | | | | Although there will be variations based on |
| a business opportunity. When buying a | | | | the type of business and several other |
| business that does not include commercial | | | | factors, a common down payment requirement |
| real estate, business borrowers need to | | | | for a commercial loan to buy a small business |
| realize that business loan options will be | | | | opportunity is 20-25 percent. The presence of |
| greatly reduced in comparison to a business | | | | seller financing might lessen the down |
| purchase that can be financed with a | | | | payment needed to acquire a small business |
| commercial mortgage. | | | | opportunity. |
| | | | |
| The suggestions and advice in this commentary | | | | Buying a Business Opportunity - Business Loan |
| build upon commercial loan covenants that are | | | | Refinancing Options |
| commonly provided by commercial lenders | | | | |
| willing to offer commercial financing | | | | A related business loan issue to anticipate |
| throughout much of the United States for | | | | when buying a business is that refinancing |
| buying a business opportunity. There will | | | | the business opportunity loan terms will |
| often be various private financing scenarios | | | | normally be even more difficult than the |
| in which the seller might be willing to | | | | original business financing. There are |
| wholly finance a business opportunity | | | | currently some new business loan programs in |
| acquisition, and we will not attempt to | | | | the final stages of development that could |
| discuss those commercial loan possibilities | | | | dramatically improve future refinancing |
| in this commentary. | | | | options. But until these new business |
| | | | financing options are finalized, it is |
| Length of Business Loan to Expect When Buying | | | | important to arrange the best possible terms |
| a Business Opportunity | | | | initially and not depend upon refinancing |
| | | | possibilities. |
| When purchasing a business opportunity, | | | | |
| commercial loan terms will almost always | | | | Avoiding Problem Lenders When Buying a |
| include a reduced amortization period in | | | | Business Opportunity |
| comparison to a commercial real estate loan. | | | | |
| A business loan term of ten years is normal, | | | | The selection of a commercial lender might be |
| and that length of loan is likely to be tied | | | | the most important phase of the business |
| to a requirement that the commercial lease | | | | financing process for buying a business. An |
| will not expire before the loan matures. | | | | equally important task is avoiding lenders |
| | | | that are unable to finalize a commercial loan |
| Likely Business Loan Interest Rates to Buy a | | | | for buying a business. |
| Business Opportunity | | | | |
| | | | By avoiding such lenders, commercial |
| The likely range to buy a business | | | | borrowers are likely to avoid many other |
| opportunity is 11 to 12 percent in the | | | | business financing problems frequently |
| present commercial loan interest rate | | | | associated with buying a business |
| circumstances. This is a reasonable level for | | | | opportunity. Avoiding problem lenders will be |
| business opportunity borrowing since it is | | | | instrumental to the eventual success of both |
| not unusual for a commercial real estate loan | | | | the business loan process and the long-term |
| to be in the 10-11 percent area. Because of | | | | financial health of the business being |
| the lack of commercial property for lender | | | | acquired. |
| collateral in a small business opportunity | | | | |
| transaction, the cost of a business loan to | | | | Copyright 1995-2007 AEX Commercial Financing |
| acquire a business is routinely higher than | | | | Group and Stephen Bush. All Rights Reserved. |
| the cost of a commercial property loan. | | | | |