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3 Types of Loans to Buy an Existing Business

Companies / Debt & Loans Sep 18, 2020 - 10:34 AM GMT

By: Dumitru_Midon

Companies

One of the easiest ways to start a business almost immediately and get things going is by buying an already existing business. However, this comes at a price, which most people do not already have stacked up in their savings. In this case, taking a loan to buy a business can be your best step. As much as it isn’t a smooth road to take, it is also not as difficult as you think. 

Anyone can buy a business, regardless of the state of their account balance. This, however, depends on different factors, as you have to opt for the payment plan that best suits you. We have highlighted three types of loans you can take to purchase a business. 


1. Bank Loans

Taking a bank loan is often the first option many people think of when they plan to take a loan. This is due to the structure built around it, which you may not easily get from individual loans or some other non-traditional lending firm. However, bank loans may also prove difficult sometimes, as their requirements and process can be daunting.

The lending criteria of a banking system is quite strict, as they would require collateral, business plan, business account details, full details on accounts payable and receivable, financial statements for your account and the company’s account, and more. All these reduce your chances of getting qualified for a loan but the good part of bank loans is that you will be getting a secured business loan. There are, however, other types of loans to explore if this process seems daunting for you. 

2. Seller Financing

This is a case where the seller allows a flexible payment plan, such as paying a specific percentage at first and then agreeing to pay the rest in installments. The seller is likely to give you a flexible payment plan even if the bank or other traditional lenders turn you down. However, it might come with some legal costs and regardless of the outcome of the business, you are still required to meet the payment expectations. 

While this may be beneficial to you the buyer, the downsides are that it might incur more interest in the long run and the seller could also run a credit card check on you. However, in most cases, it is still a viable option. 

3. Peer-to-Peer Lending

This is a form of lending that connects borrowers to lenders, as individuals can directly access their lenders without any third party involved. Your lender could be an individual or a company willing to lend you the money to buy the business. However, this usually comes at their terms and interest rates and you may have to opt for the one that suits you best.

Conclusion

There are several kinds of loans available to buy an existing business today. You just have to choose the one that best suits your preference in terms of requirements, payment plan, and interest rates, among others. For example, small business owners are more likely to try other business loans apart from bank loans, due to the long process and requirements that they are unlikely to meet. 

By Dumitru Midon

© 2020 Copyright Dumitru Midon - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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