Frequently Asked Questions

Should You Buy an Existing Business?

New entrepreneurs are often torn between buying an existing business and launching a new company from scratch. The decision is not simple because buying an established business has both advantages and disadvantages. Advantages of buying an established business In most cases, buying an existing business is a safer option than starting a new company. Furthermore, […]

Buying a Business? How to Pay for it

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 a […]

What is an Equity Injection?

The equity injection is the funds that a buyer contributes to a business acquisition. Equity injections are commonly required in transactions that use lender financing. In this article, we cover: What is an equity injection? How are equity injections calculated? Why are they required? Can the equity injection be financed? Common equity injection sources Exceptions […]

How Much Money do You Need to Buy a Business?

This question is common for entrepreneurs looking to buy their first business. The answer depends on how you plan to pay for the acquisition. In most cases, buyers use financing – since few people can afford to pay for a business in cash only. We think that buyers actually have a different question in mind. […]

Advantages and Disadvantages of a Small Business 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: Advantages of using an LBO Disadvantages of this strategy Common misconceptions For a detailed explanation of LBOs, read “What […]

Can I Get a Business Acquisition Loan with No Collateral?

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: What is collateral? Why do lenders ask for collateral? Why is personal collateral required? Can you finance […]

Can You Do a Leveraged Buyout with No Money Down?

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? In […]

What is a Leveraged Buyout (LBO)? How Does it Work?

A leveraged buyout, commonly referred to as an LBO, is a type of financial transaction used to acquire a company. Buyouts are highly leveraged transactions. They use equity from the buyer and debt secured by the target company’s assets. Most small business LBOs aim for a ratio of 90% debt and 10% equity, though these […]

How to Get a Business Acquisition Loan

In this article, we discuss the process of getting a loan to acquire a business. This article covers the basics of a business acquisition loan – what you need to have in place before you apply for a loan and how to get the process started. This article helps you if: You are looking for […]

Requirements for a Business Acquisition Loan

This article discusses the main requirements you must meet to qualify for an SBA 7(a) loan. This type of loan is one of the most common financing tools used by small business owners to finance a business acquisition. A Quick Word on SBA Loans The term “SBA Loan” is a bit of a misnomer because […]