Acquiring a business is an exciting endeavor! Buying a company can give you access to new technology, new markets, and new resources. Whether you’re buying a completely separate business or planning to absorb it into your current company, you can set yourself up for success by planning for the acquisition process in advance.
Here are a few important things to consider when acquiring another company:
- Calculate your acquisition costs.
When calculating the costs of an acquisition, make sure you consider additional expenses like closing and operational costs, attorney fees etc. This is especially important in cases where existing cash and/or receivables will not convey. Once you have an idea of how much financing you’ll need, you’ll be able to choose the best loan option for you.
- Develop a business plan.
Most lenders will want to see a business plan before they will feel confident investing in your business. Your plan should include things like a company description, market analysis, business structure, funding requests, financial projections with assumptions, etc.
- Gather all the documents you need to apply for a business loan.
Preparing your financial statements in advance can help the lending process go much smoother. Things like purchase contract or Letter of Intent, income and expense projections, and a list of owners and affiliates show the lender that you can be trusted and you’ve got a successful plan in place.
- Find a lending partner.
Don’t just partner with any bank. For a successful acquisition, you’ll want to find a lending partner who understands your business, has experience in your industry, and can structure a loan that meets your current and long-term needs.
- Decide between a conventional or SBA loan.
Traditional bank loans can sometimes be hard to obtain for business acquisition purposes. An SBA loan has the advantage of being backed by the U.S. government and is typically the preferred source of acquisition funding.
At FNB Small Business Finance, our SBA lending team has years of experience in business acquisitions, and we are recognized by SBA’s Preferred Lender Program. We can help you navigate the SBA’s loan program to acquire a business with a structure and terms that best fit your needs.