How to Finance and Buy a Business Opportunity Investment

How to Finance and Buy a Business Opportunity Investment
There are a number of key business financing difficulties
to anticipate and avoid when obtaining a business
opportunity loan that covers a business acquisition that
does not include commercial property as part of the
financing. For example, many commercial lenders will not
provide commercial loans that do not include real estate as
part of the business purchase.

The level of interest for buying a business opportunity
investment has increased due to the reduction of activity
involving residential real estate investing. However,
because there are so many critical differences between
financing residential real estate and business financing,
it is important for potential business owners to educate
themselves before proceeding.

In order to buy a business, a commercial borrower is likely
to need business financing. If the business includes
commercial real estate, the borrower will need a commercial
mortgage. If the business purchase does not involve real
estate, a business borrower must use a business opportunity
loan.

Unfortunately the availability of business opportunity
financing is more restricted than commercial real estate
financing. There are also some potential limitations and
problems unique to a business opportunity loan, and
commercial borrowers should make every effort to avoid
these business financing difficulties.

This summary is designed to address the unique business
financing requirements involved when real estate is not
involved. Our suggested approach to business opportunity
financing is provided below.

Begin your business opportunity investment financing plans
by formulating a realistic assessment of cash available for
a down payment and desired maximum business purchase price.
In most business financing scenarios, a total down payment
approximating 20% to 25% of the purchase price is
advisable. Usually seller financing is permissible for a
portion of the down payment, but a potential buyer
generally needs to plan on investing at least 10% of the
purchase price from their own funds even if the seller is
providing 15% or more.

Evaluate whether a Small Business Administration loan is
relevant for your particular business financing and
investing circumstances. This step is both important and
somewhat complicated, and the involvement of an SBA loan
expert is strongly advised. Among the issues to explore are
whether collateral is available for SBA financing and how
important refinancing is to your overall business
opportunity financing process.

Determine the length of lease to be arranged in conjunction
with buying the business. As noted previously, business
opportunity financing and investing does not involve the
purchase of commercial real estate, so arrangements must be
made for a long-term lease. The length of the lease is
important because the normal business finance terms will
restrict the length of business financing to the period
covered by the lease (although you should anticipate a
ten-year maximum for investment business loans). In other
words, with a seven-year lease, the commercial loan is
likely to be for seven years, and even with a fifteen-year
lease, the commercial financing will probably expire in ten
years.

Explore whether including real estate is a viable option or
not in order to buy a business. With the inclusion of
commercial property, you can obtain a longer business loan
and the interest rate will be lower. However, improved
business financing terms should not be the sole factor you
look at, since the absence of a commercial mortgage can
prove to be a significant advantage in a declining real
estate market.

Discuss business finance options with a business
opportunity loan expert before making any offers to buy a
business investment. These discussions should include
issues such as potential purchase price, down payment
possibilities, seller financing, buyer credit scores, tax
return requirements and collateral options.

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Steve Bush is a small business loans expert - learn how to
avoid mistakes with commercial loans and find out about
business cash management strategies at AEX Commercial
Financing Group =>
http://aexcommercialfinancing.com