Purchasing an existing business is a smart way to give yourself a head start as you look for greater financial success. But what type of loan do you need if you want to purchase an existing business? Keep reading to find out.
What Type of Loan Do I Need if I Want to Purchase an Existing Business?
No doubt, purchasing an existing business is a smart strategy. By buying an already established company, you to skip some of the harder parts of entrepreneurship, like identifying a profitable niche or building a customer base
However, as with anything else, convenience comes at a cost, and purchasing an existing business will usually require you to take out a business loan.
But what type of loan? You’ll have two basic options:
- Conventional loan
- SBA (7a) Loan
A conventional loan is the typical loan granted by a bank or another similar institution. This is a good option if you can meet the stringent standards of banks such as a spotless credit history and an excellent credit score.
However, not everyone can meet those strict requirements. In those cases, an SBA 7(a) loan is the option that makes the most sense.
About SBA 7(a) Loans
SBA loans are loans partially guaranteed by the Small Business Administration (SBA), a government agency geared toward helping Americans start, build, and grow businesses.
It’s worth noting that the SBA itself doesn’t lend money directly; it only sets guidelines and offer its guarantee for the loan (or a part of it)
There are different types of SBA loans, with the two most common being 7(a) loans and 504 loans.
While 504 loans were designed for the purchase or major fixed assets, such as equipment or land, 7(a) loans are designed to cover a variety of purposes, including purchasing an existing business, especially when you are also buying the land where the business is situated.
Some of the benefits of using a 7(a) loan to purchase an already established business include:
- Less stringent terms
- More flexible limits
- Lower interest rates
7(a) loans are capped at $7 million, with repayment terms of up to 25 years. The interest rates can be fixed or flexible, depending on the lender.
Gellyfish: Business Loans in California and Beyond
Looking for business loans that combine flexibility and certainty of execution? Gellyfish Commercial is the answer!
Contact us today by email (email@example.com), telephone (877-800-4493), or social media (Facebook, Twitter, LinkedIn), to schedule a free consultation or to learn more about our financing solutions.