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Business Financing Alternatives To Buy A Business Opportunity |
By:
Stephen A. Bush |
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Business Financing Alternatives to Buy a Business Opportunity
by Stephen A. Bush
When buying a business opportunity that does not include commercial property, borrowers should realize that commercial loan options will be significantly different when compared to a business purchase that can be acquired with a commercial property loan. This problematic situation occurs because of the normal absence of commercial real estate as collateral for the commercial financing when buying a business opportunity. In terms of arranging the business financing, efforts to buy a business opportunity are almost always described by commercial borrowers as excessively confusing and difficult.
The comments and suggestions in this report reflect business financing conditions that are frequently offered by substantial lenders willing to provide a business loan to buy a business opportunity throughout most of the United States. There are likely to be circumstances in which a seller will privately fund the acquisition of a business opportunity, and it is not our intent to address those business loan possibilities in this report.
Buying a Business Opportunity - Length of Business Financing to Anticipate
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.
Buying a Business Opportunity - Appropriate Interest Rate Expectations
In the current business loan interest rate environment, the likely range for buying a business opportunity is 11 to 12 percent. To put this in perspective, it is not unusual for a commercial mortgage to be in the 10 to 11 percent range. The cost of business financing to buy a business is routinely higher than the cost of a commercial mortgage due to the lack of commercial property for lender collateral in a business opportunity transaction.
Down Payment Expectations to Buy a Business Opportunity
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.
By eliminating such problem lenders, business borrowers will also be in a better position to avoid many other business loan problems typically experienced when buying a business. The proactive approach to avoid problem lenders can have dual benefits because it will contribute to both the long-term financial condition of the business being acquired and the ultimate success of the commercial loan process.
Copyright 2005-2007 AEX Commercial Financing Group, LLC. All Rights Reserved.
Contact Steve Bush at The AEX Commercial Mortgage Loan - Business Loan Guide for commercial mortgage - church financing solutions Don't reprint this exact article. Instead, reprint a free unique content version of this same article.
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Article Source: http://www.statssheet.com/articles/article54027.html |
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