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Business-loan-strategies-to-buy-a-business-opportunity
By Stephen-A.-Bush
Buying a business opportunity is likely to be an extremely challenging task when arranging the business loan. This is largely due to the usual lack of commercial property as collateral for the business financing to buy a business opportunity. When buying a business that does not include commercial real estate, business borrowers need to realize that business loan options will be greatly reduced in comparison to a business purchase that can be financed with a commercial mortgage.
The suggestions and advice in this commentary build upon commercial loan covenants that are commonly provided by commercial lenders willing to offer commercial financing throughout much of the United States for buying a business opportunity. There will often be various private financing scenarios in which the seller might be willing to wholly finance a business opportunity acquisition, and we will not attempt to discuss those commercial loan possibilities in this commentary.
Business Loan to Buy a Business Opportunity - Length of Loan
Business financing conditions to buy a business opportunity will frequently involve a reduced amortization period compared to commercial mortgage financing. A maximum term of ten years is typical, and the business loan is likely to require a commercial lease equal to the length of the loan.
Expected Interest Rate Costs for Buying a Business Opportunity
Commercial borrowers should anticipate business financing interest rates in the range of 11-12 percent to buy a business opportunity in the current interest rate climate. Because a rate of 10-11 percent is currently normal for commercial real estate financing, the rate for business opportunity borrowing should be viewed as quite reasonable. The commercial loan interest rate cost to purchase a small business opportunity is typically higher than the cost of a commercial real estate loan due to the absence of business property for collateral in a business opportunity purchase.
Buying a Business Opportunity - Normal Down Payment Requirement
Although there will be variations based on the type of business and several other factors, a common down payment requirement for a commercial loan
to buy a small business opportunity is 20-25 percent. The presence of seller financing might lessen the down payment needed to acquire a small business opportunity.
Refinancing Alternatives After Buying a Business Opportunity
A critical commercial loan term to expect when acquiring a business opportunity is that refinancing business opportunity financing will routinely be more problematic than the acquisition business loan. There are presently a few business financing programs being developed that are likely to improve future business refinancing alternatives. It is of critical importance to arrange the best terms when buying the business and not rely upon business opportunity refinancing possibilities until these new commercial financing options are finalized.
Buying a Business Opportunity - Lenders to Avoid
Most commercial borrowers are likely to consider the most important part of the commercial loan process for buying a business to be the choice of a business lender. Not to be overlooked is the importance of avoiding lenders that are not generally successful in finalizing business opportunity financing.
Commercial borrowers are likely to avoid many other commercial financing difficulties usually involved with buying a business opportunity by eliminating problem lenders from consideration. Eliminating problematic lenders will be critical to the immediate success of the business financing efforts as well as to the future financial condition of the business being purchased.
Copyright 2005-2007 AEX Commercial Financing Group, LLC. All Rights Reserved. Article Source: http://activeauthors.com Contact Stephen Bush at AEX Working Capital Management - Commercial Mortgage Programs for credit card processing - church financing strategies
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