You might use a business acquisition loan to fund a startup, buy into a franchise, or buy a rival company outright. The challenge comes in knowing where to find this type of borrowing and how to use it effectively. Read on to discover how business acquisition loans work, the pros and cons, and costs.
| Financially reviewed by Gordon Scott 7.21.21 |
| At a glance — A business acquisition loan may enable you to more effectively traverse the demanding and often costly undertaking of purchasing a small business. Although there is no one particular loan created for this end, there are many loan types for small businesses. On this page, our experts outline all you need to know about this type of borrowing and the top lenders. |
We’ve included a mixture of specialist acquisition lenders as well as some all-purpose options in our list below. Most platforms can be quite flexible in what you use your funding for but startup loans might have stricter criteria.
Company | Max/Min Loan | Loan Rates | Special Requirements | Get a loan |
$5,000 - $5 million | Starting from 5.5% | You must present a business plan | Funding will usually take around 30 days on average | |
$5,000 - $250,000 | From 35% | Credit score of 600 Minimum annual revenue of $100,000 | Ondeck specializes in fast funding and you could have your cash within 24 hours | |
$5,000 - 500,000 | 10.98-30.89% | Fair credit score between 580-669 | You can usually get funded within 48 hours | |
$5,000 - $400,000 | 9.99% - 45% | A minimum credit score of 500 Minimum monthly revenue of $15,000 |
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$30,000 - $500,000 | Starting from 6.99% | A minimum credit score of 660 Minimum of two years in business | Funding usually received within one week |
Lendio is one of the largest loan marketplaces in the country. It’s disbursed more than $12 billion in funding since it was founded in 2011 and has partnered with more than 75 lenders. It’s one of the few alternative lenders that offers specific business acquisition loans.
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Lendio Features
Lendio offers excellent rates, starting at just 5.5%, and a generous borrowing limit of up to $5 million. Terms are pretty good too and you can repay your loan between a 10 and 25 year period. Best of all, there are no minimum requirements to apply other than needing to submit a business plan, meaning all applicants are welcome.
Our thoughts
It’s easy to see why Lendio is our top pick as it’s perfect for even the smallest of businesses looking to apply for an acquisition loan. There’s no hard pull to your credit rating for taking a look at offers, and it’s a good way to see the kind of deals you can get. Read more in the full Lendio review.
OnDeck doesn’t offer a specific business acquisition loan, but it's term loans can be used for any purpose. The platform is a direct lender that offers discounts to repeat customers.
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OnDeck Features
All of OnDeck’s term loans are intended as short-term products that can be funded quickly, usually within 24 hours. It’s perfect for small businesses that need to make a fast acquisition where time is of the essence. However, this convenience comes at the cost of higher interest rates.
Our thoughts
While interest rates might be a little high, OnDeck should be your go-to lender in a pinch. If you need to purchase a business quickly or have an emergency that needs funding there’s a good chance you’ll be accepted. Read more in the full OnDeck review.
LendingClub specializes in low-dollar, short-term loans. Eligibility criteria are quite lenient and it makes the ideal choice for borrowers that need fast funding to buy into a franchise business, or are founding a startup, even though loans can go up to $500,00 .
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LendingClub Features
LendingClub is friendly to new businesses and all applications are welcome as long as you have a credit score between 580-669. The platform can usually arrange funding within 48 hours of being approved.
Our thoughts
If you’re looking for a way to fund a new startup, or just need a quick injection of cash, you needn’t look any further than LendingClub. A quick call to the friendly customer service team will help you understand what options are open to you and how best to use your loan. Read more in the full LendingClub review.
Credibly is a direct lender that focuses on those with bad credit, welcoming applications from anyone with scores of 500 and above. The platform was founded in 2010 and now works with more than 325 industries when sourcing acquisition loans.
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Credibly Features
Credibly actually offers highly tailored business acquisition loans over the long term. The figures in our table above represent a very broad range of possible terms and you may be offered something different to this. Each application will be reviewed by your personal loan advisor and many factors go into determining your final offer.
Our thoughts
If you’re looking for a long-term loan, and aren’t in a rush to apply, then Credibly is a good place to start. Its customer service is top-notch and having access to a personal loan advisor throughout the process makes everything that much easier. Read more in the full Credibly review.
SmartBiz is an online platform that connects borrowers to some of the biggest banks across the country. It’s usually able to secure pretty good rates but you’ll find eligibility criteria a little stricter here.
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SmartBiz Features
When applying at SmartBiz you’ll be offered a long-term bank loan. However, you can use this for business acquisition purposes if you wish. You’ll need a good credit rating as a minimum and need to have been in business for two years. Rates start at a very respectable 6.99% and terms extend to five years.
Our thoughts
It’s a little harder to get a loan here than other providers on our list, but we think it’s definitely worth it if you have good credit. The platform is reliable, efficient, and offers solid rates and terms. Read more in the full SmartBiz review.
A business acquisition loan is a type of funding that’s primarily used to purchase another existing business. However, it can also be used to buy out your partners in your current business, open up a franchise, or even fund a brand new startup. These types of purchases typically require large capital expenditure upfront which is why many turn to loans to fund the acquisition.
You’ll generally find that applying for a business acquisition loan requires a more in-depth review by the lender and for you to provide more documentation. This isn’t always the case though, and as we’ve seen from our list of providers, there are those that will allow you to use your funding for any purpose that you’d like.
When you apply you’ll of course be asked why you want the funding and may need to provide the following:
Before deciding to acquire any business, whatever the size, there are always going to be many stages of due diligence to carry out. This will help to confirm whether or not the business is sound and how beneficial the acquisition will be. There are three key areas that need to be scrutinized.
Deciding to acquire another business, buy into a franchise, or expand your operations is a big decision. However, a targeted purchase can be a huge boon for growth and can add multiple new revenue streams to your operations. As long as you have a solid business plan and a clear idea of which business you’d like to acquire, it’s easier than ever to get a loan.
In most cases, lenders will let you submit an application for pre-approval and your credit score won’t take a hit. It’s risk-free to browse options, and in many cases, you could be funded that very week. So, why not take a look at some of the great lenders out there?
