Here Is What You Need to Know About Business Acquisition Loans

Perhaps you are seeking to acquire a business and add it to your portfolio. In particular, if you have never purchased a business before, you need to keep a few things in mind to successfully secure business acquisition financing.

It’s a fact that business acquisition loans can be very difficult to obtain. That’s because many things have to be checked before the loan is approved. Here are some of them:

Personal Credit Score

This may come as a big surprise but a person’s personal credit score can have a significant impact on their financing prospects. The reason for this is simple. The lenders are not just making a loan to a business, they are entrusting their cash to a person. This makes scrutinizing the borrower’s credit history very important. The credit history provides an understanding of the prospective borrower’s repayment habits.

A credit score above 600 will brighten up your chances of getting a small business loan.

Business Credit Score

This one should be quite obvious. Lenders will evaluate the business’s payment history, new credit, credit types, credit history length and amounts owed. Payment history will have a deep impact; so it’s important to pay your outstanding debts in good time to get a good evaluation.

It is advisable to follow your business credit ratings not only to prevent inaccurate reporting but also to improve your score. Keeping track of the score will tell you if your score is good enough. If not, you can easily find out the deficit and then devise an appropriate strategy to level up.

Tax Returns

You need to have a good rapport with the IRS. Lenders will ask for your tax returns over the past two or three years. Make sure that you pay your taxes on time and avoid mistakes like underpayment of taxes and penalties. A good track record of tax payments will increase your prestige.

Cash Flow Statement

This is a snapshot of the business’s financial health. This statement will indicate how well your business can handle the burden of acquisition and loan repayment.

A good profit margin is a great plus point and will help a lot, particularly if the new business that you are acquiring is not immediately profitable.

Some people think that acquisition is one way to rescue their business from cash flow problems or operating losses. But most lenders don’t agree.

Outstanding Debts

You must settle any outstanding debts to improve your chances of successfully securing acquisition finance. Having large outstanding debts on your balance sheet is obviously an alarming sign for lenders. It shows that you are not capable of settling your debts on time. Apart from this, it represents other issues that will negatively impact lenders.

Your current outstanding debts qualify for ‘first position’. This means that they will be paid first in case of liquidation. Your lenders will not be amused because they will have lower priority for repayment,  increasing their risk of losing principal amount and interest.

Type of Lender

Look out for lenders that are friends of small businesses and offer easy terms on other lines of credit. You will have much greater chances of success with such business funding firms.

KLB Business Funding is one such awesome firm.

Contact KLB Business Funding today:

3702 Pratt Avenue Bronx NY 10466

(347) 755-2257

info@klbbusinessfunding.com