Business Acquisition Loans: What to Know Before You Borrow
Buying an existing business usually takes more capital than the buyer has on hand. An acquisition loan closes that gap, secured against the business being bought and, almost always, against something of yours.
Most of what determines whether that is a good idea is decided before you apply.
What the money actually comes from
Acquisition financing comes from banks, credit unions, SBA-backed lenders and non-bank lenders. Each underwrites differently, and the same deal can be approved by one and declined by another for reasons that have nothing to do with its quality.
A few structures recur. Term loans give you a lump sum against a fixed repayment schedule. SBA 7(a) loans are made by lenders and partially guaranteed by the government, up to a maximum loan amount of $5 million. Asset-based lending is secured against what the target owns, which suits businesses with real assets and not much else. Seller financing, where the seller takes part of the price over time, is common and is frequently the cheapest money in the deal.
The term is where people miscalculate
Acquisition loans are often described as long-dated. That is only partly true, and the difference changes your monthly payment.
Under the SBA 7(a) program, the twenty-five year term applies to real property. Standard purposes are ten years or less, unless the loan finances real estate or equipment with a useful life beyond ten years. So a deal without real estate in it generally amortizes over a considerably shorter period than the headline figure suggests.
Work out the payment before you fall in love with the business. A price that works over twenty-five years and fails over ten is not a price you can pay.
What you are putting up
These are secured loans. Collateral is the acquired company's assets, and commonly your personal assets as well, including your home.
Expect a personal guarantee. It is normal, and it means the downside is not contained inside the company. Read what it covers, for how long, and what releases it.
What the lender will want to see
A valuation that is not yours. Lenders want an independent view of what the business is worth, and they will not lend against your enthusiasm.
Diligence that has actually been done. Financials, contracts, legal standing, customer concentration. This takes longer than buyers expect and it is where deals get repriced. If you are buying an online business, the verification problems are different and less obvious.
A plan for running it. Projections, yes, but the part lenders actually read is who is going to operate this business and whether they have done it before.
Your personal financial history. Credit, existing obligations, tax returns, bank statements. The loan is to you as much as to the business.
Leave room for after the close
The most common financing mistake is borrowing exactly enough to buy the business and nothing more. The first months after a purchase consume cash: transition costs, things the diligence missed, customers who wait to see what changes.
Fund the working capital alongside the purchase, not after it, when your borrowing position is weaker.
One more thing: the acquisition-lending market attracts predators, and a buyer under time pressure is the ideal target. Knowing the warning signs is worth ten minutes.
Where FM Enterprises fits, precisely
Worth being exact here, because the distinction matters.
FM Enterprises does not arrange, place or broker outside financing. It does not introduce you to lenders for a fee.
What it does is two separate things. It structures and presents deals, which is advisory work: getting the shape of the transaction right so that whoever is on the other side can say yes to it. And separately, it lends directly from Fadi Malouf's own balance sheet against qualifying deals, selectively, on businesses FM Enterprises understands well enough to underwrite itself.
If you are looking at an acquisition and want a straight read on whether the deal and its funding hold together, book a call.