If you’re trying to start a new business or further the parameters of a preexisting business, then business acquisition loans are viable options for securing the funding you need. There are many different prospective sources for these small business loans. Including the federal government (through the Sba loan program), private financiers, commercial lenders, and more. As with any security, investment vehicle, or loan, there are advantages and risks associated with these.
Benefits of Business Acquisition Loans
One of the chief pros of such a loan is the relatively fast turnaround time. Which can have you receiving your funds in just a day or two. Compare this with the SBA government route, where it can take months to finally have the loan deposited into your bank account.
Just as beneficial is the fact that business acquisition loans do not put your assets at risk. Since there’s no collateral required – depending, of course, on the terms set out. In particular, if you’re seeking a loan for equipment financing, or one from the SBA for any reason, then the collateral isn’t a feature.
Finally, although short-term loans are the more popular. There are long-term business acquisition loans that can be essential in helping your business weather the early years. Which cash flow is often low and the longer repayment period leads to low monthly payments that don’t unduly hamper your working capital.
Detriments of Business Acquisition Loans
Since one of the chief benefits is the lack of collateral, you can expect this type of loan to be dependent on creditworthiness and cash flow. This can be a negative if you’ve got a poor credit score; particularly in the case of the SBA.
Another potentially major drawback is the steady creep of interest rates. Since there’s no collateral involved with business loans of this type, you can expect the interest rate to reflect the risk that the lending company is undertaking to lend you the money.
Overall, the business acquisition loan certainly has its place in the world of financing for equipment loans and property acquisition; you should take an inventory of available financing options to see which best suits your company.