The success of business opportunity investment strategies
will depend heavily on the quality of business financing
which is arranged. Business finance strategies for business
opportunity investing are more difficult than most
borrowers realize, particularly if prospective business
investors are primarily familiar with residential or
commercial real estate investment property.
Buying a business opportunity is likely to be an extremely
challenging task when arranging the business loan. This is
largely due to the usual lack of commercial property as
collateral for the business financing to buy a business
opportunity. When buying a business that does not include
commercial real estate, business borrowers need to realize
that business loan options will be greatly reduced in
comparison to a business purchase that can be financed with
a commercial mortgage.
Business Opportunity Investment Financing Guidelines -
The guidelines and comments in this article are based upon
business loan terms that are typically available from
respected lenders willing to provide business financing for
buying a business opportunity throughout the United States.
There will always be occasional situations in which the
seller is willing to privately finance the purchase of a
business opportunity, and it is not practical to discuss
those business financing possibilities in this article.
Length of Business Loan to Expect When Buying a Business
Opportunity -
Business loan terms to buy a business will typically
include a shorter amortization period than commercial real
estate financing. A ten-year maximum term is common, and
even that length of business financing is likely to require
a commercial lease of at least ten years.
Likely Interest Rates to Buy a Business Opportunity -
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 Requirements for Buying a Business Opportunity
-
Depending on the specific type of business and some other
issues, a normal down payment for a business loan to buy a
business is 20 to 25 percent. Some seller financing (such
as 10 percent) is usually helpful and in some cases might
reduce the down payment required from the buyer to buy a
business.
Buying a Business Opportunity - Refinancing Options -
A related business loan issue to anticipate when buying a
business is that refinancing the business opportunity loan
terms will normally be even more difficult than the
original business financing. There are currently some new
business loan programs in the final stages of development
that could dramatically improve future refinancing options.
But until these new business financing options are
finalized, it is important to arrange the best possible
terms initially and not depend upon refinancing
possibilities.
Lenders to Avoid When Commercial Borrowers Buy a Business
Opportunity -
Perhaps the most important phase of the business loan
process for buying a business opportunity is the selection
of a commercial lender. In our view an even more critical
stage of this process is avoiding certain lenders that are
routinely unsuccessful in finalizing a business loan to buy
a business.
By avoiding such lenders, commercial borrowers are likely
to avoid many other business financing problems frequently
associated with buying a business opportunity. Avoiding
problem lenders will be instrumental to the eventual
success of both the business loan process and the long-term
financial health of the business being acquired.
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Stephen Bush and AEX Commercial Financing Group provide
business opportunity loan and business finance help and AEX
Commercial Real Estate Investment Property Financing and
Business Loan Reports:
http://aexcommercialfinancing.com
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