The Business Acquisition Bridge Loan

Business Acquisition Loan

Have you attempted to purchase a business and you had a decent down payment but, could not qualify for financing? Is your seller motivated, and would they allow financing based on business assets? We may have a financing option for you. The business acquisition bridge loan is not based on your credit and your collateral, it is based on the cash flow of the business you are buying. This bridge loan helps you to buy and operate your business today while you build your financial profile to qualify for conventional long term financing.

Business Acquisition Bridge Criteria

These are the main factors the underwriter will review in our Business Acquisition financing.

  1. Down Payment – You must have at least 20% of the acquisition costs as a down payment. The funds are not sourced or seasoned, but are simply verified prior to closing.
  2. Experience – You must have at least 5 years in related experience. For example, if you are looking to purchase a restaurant, you should have had 5 years in the management or ownership of a restaurant.
  3. Seller Second – The seller is willing to carry a note for up to 60% of the purchase price.
  4. Cash Flow – The Bridge loan is based on the cash flow of the business. In reality it is a revenue advance not a loan. In essence the current owner is acceting as partial payment for their business future earnings ofsaid business.

The Terms of Bridge Loan

The amount of the advance and term of the advance is based on the financial strength of the borrower and the cash flow of the business. Therefore, every business will not get the same amount for a similar purchase price and credit profile. This is a matching loan program, and the purchaser can qualify up to the amount of their down payment assuming the cash flow of the business can support the payment. This is short term financing. The term is usually for three to six months. At the end of that term, if you need to you may qualify for additional financing.Optimally the business will qualify for long term financing.

Who Could Benefit From The Business Acquisition Bridge Loan

This is a niche program for business owners who want to sell and the buyer can not qualify for conventional financing immediately. Therefore, there are many situations and people whom the bridge program will help. They include, but are not limited to:

  • Seller Ready to Retire
  • Seller Ready to Relocate
  • Seller to Family or Friends
  • Seller to Business Partner
  • Buyers with Down Payment, but not perfect credit.
  • Employees who wish to purchase the company.

These are a few situations where the Business Acquisition Bridge Loan Program would be an means to finance the sell a successful business.

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Venture Capital Business Loan No Credit No Collateral

Business Loan With No Credit

Would you like to have access to capital to fund your small business based on your business plan regardless of your credit and with no collateral. You must just prove your ability to repay the loan with a solid business plan, financial projections and the expertise or experience to execute said plan.

Funds are available from private equity lenders and venture capitalist to finance a viable business based on a solid business plan with a projected revenue to service your loan and become profitable. There is no minimum credit score. There is no collateral needed. There is no need to be in business for two or more years with proven cash flow track record. All you need to do is sell the private investors on your business plan and you can be funded.

Debt or Equity Financing

There are two types of financing available. You can choose debt financing which is just a loan. Or you can choose equity financing, which requires you to give the private equity investor a share of your company. This is simply selling stock in your company. In the short term debt financing is much more expensive. The costs is relative to the risks. If you are seeking capital from a corporation that does not evaluate your credit, requires no collateral and does not demand a proven track record, you must understand this loan will be very expensive.

On the other hand if you give an equity position to your company you owe nothing in the beginning, but in the long run when you are successful you will pay much more for an equity partner.

In either case the venture capitalist is betting on your success. Many people fail. Banks and traditional financing sources have a very low tolerance for risks and therefore their reward (costs) are relatively low.

Therefore, if you have a viable business plan that can be very successful with the right infusion of capital, consider venture capital or private equity investment into your company.

The Costs

As an example of the potential costs a business might pay a private investor 33.33% of the loan amount the first year and a smaller interest rate (like 10%) for a five or ten year term. Those terms sound absurdly ridiculous and at first glance most businesses would reject that type of financing even with no other options. But, if you analyze the benefits and determine the profit far outweighs the costs you might consider this option. For example, I recently encountered a business plan that the owners needed to borrow $100,000 and would net $300,000 in year one and over $1,000,000 annually thereafter. Is $50,000 too much to spend to become a millionaire? If I could I would do that 10 times a week.

The Solution

So weigh your options. Venture capital financing and private equity are expensive financing alternatives. Will your company be profitable enough to afford these options? Will your business qualify for any other means to raise capital? Only you can determine that answer. This is not the right option for everyone. Is it right for you?

 

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