Summary: Some business brokers and influencers promote the idea of buying businesses operated by absentee owners as an easy way to generate passive income. Buyers imagine they can just acquire the business and collect payments. Unfortunately, the reality is often different. Buying an absentee-run business requires many things to line up correctly. The opportunity must […]
Business Acquisition Loans
Buying a Business? How to Pay for it
Summary: Buying an established business is a common way for first-time entrepreneurs to get into business ownership. It’s a strategy that has lower risk because buyers can review past performance and, consequently, be better able to forecast performance. When executed correctly, this strategy can help the buyer acquire a company with solid potential. However, buying […]
What is an Equity Injection?
Summary: The equity injection is an investment of capital that a buyer contributes to a business acquisition. It is integral to most acquisitions because every lender requires one. The size of the equity injection varies and depends on the transaction’s size, the target company’s profile, and the lender’s risk tolerance. The typical range is 5% […]
Advantages & Disadvantages of a Leveraged Buyout
Leveraged buyouts (LBOs) are a popular way to finance business acquisitions by using debt financing. This article focuses on the pros and cons of using an LBO to buy a small business. We discuss the following: For a detailed explanation of LBOs, read “What is a leveraged buyout?“ 1. Leveraged buyout advantages When used correctly, […]
Can I Get a Business Acquisition Loan with No Collateral?
Summary: There are many misconceptions regarding business acquisition loans and their need for collateral. This article explains the collateral requirements in clear terms and puts you in a better position to negotiate this requirement with lenders. The article covers: 1. The basics: What is collateral? “Collateral” refers to assets pledged to a lender as security […]
Can You Do a Leveraged Buyout with No Money Down?
Summary: Leveraged buyouts are a popular way to finance business acquisitions. Though well-known for their use in large transactions, they are commonly used in smaller acquisitions as well. Thanks to some popular media stories, leveraged buyouts (LBOs) have gained a reputation for financing an acquisition without using your own money. But is this portrayal accurate? […]
What is a Leveraged Buyout (LBO)? How Does it Work?
Summary: A leveraged buyout, commonly called an LBO, is a type of financial transaction used to acquire a company. Leveraged buyouts combine substantial debt financing with a small equity component from the buyer. Buyers typically use LBOs because debt amplifies the results of their investment. However, this feature can be a drawback if the acquisition […]
How to Get a Business Acquisition Loan
Summary: Most small business acquisitions are financed using a loan. While larger acquisitions have many financing options, smaller transactions typically rely on Small Business Administration (SBA)-backed financing. This article discusses how to get an acquisition loan to buy a small business. We review what you must have in place before you apply, how to get […]
Requirements for a Business Acquisition Loan
Summary: Business acquisition loans backed by the Small Business Administration (SBA), typically through the 7(a) program, have the simplest qualification requirements. Unfortunately, this has led to misconceptions. Qualifying for these loans is easier than qualifying for conventional acquisition loans. However, they are not easy to get. Lenders evaluate these opportunities carefully to ensure they meet […]
Leveraged Buyout Financing for Small Businesses
Most people consider leveraged buyouts as an option that can be used only to acquire larger businesses. However, nothing about a leveraged buyout (LBO) is specific to larger businesses. The concept can be – and often is – used to acquire smaller companies. In this article, we discuss: 1. What is a leveraged buyout? A […]