Buying a business opportunity is likely to be an extremely challenging business finance 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.

The comments and suggestions in this report reflect business financing conditions that are frequently offered by substantial lenders willing to provide a business loan to buy a business opportunity throughout most of the United States. There are likely to be business finance circumstances in which a seller will privately fund the acquisition of a business opportunity, and it is not our intent to address those business loan possibilities in this report.

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 business finance term is common, and even that length of business financing is likely to require a commercial lease of at least ten years.

Likely Business Finance Interest Rates to Buy a Business Opportunity

Commercial borrowers should anticipate business financing interest rates in the range of 11-12 percent to buy a business opportunity in the current interest rate climate. Because a rate of 10-11 percent is currently normal for commercial real estate financing, the rate for business opportunity borrowing should be viewed as quite reasonable. The business finance interest rate cost to purchase a small business opportunity is typically higher than the cost of a commercial real estate loan due to the absence of business property for collateral in a business opportunity purchase.

Business Financing Down Payment Requirements to Buy 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.

Refinancing Limitations to Anticipate When Buying a Business Opportunity

An important business financing factor to include in planning efforts when purchasing business opportunities is that refinancing the business opportunity financing conditions will typically be harder to deal with than the initial commercial loan. There are several new business finance programs under development that could significantly change future choices for business opportunity refinancing. Until these new business opportunity financing alternatives are available, it is advisable to obtain the best financing terms when the business is initially acquired and not rely upon future refinancing choices.

Avoiding Problem Lenders When Buying 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 business finance process is avoiding certain lenders that are routinely unsuccessful in finalizing a business loan to buy a business.

By eliminating such problem lenders, business borrowers will also be in a better position to avoid many other business loan problems typically experienced when buying a business. The proactive approach to avoid problem lenders can have dual benefits because it will contribute to both the long-term financial condition of the business being acquired and the ultimate success of the business finance process.

Author's Note: Steve Bush is the CEO of AEX Business Opportunity Financing - Commercial Mortgage Solutions. AEX Commercial Financing Group [ http://aexllc.com ] and Steve Bush provide business loan and business finance assistance throughout the United States.
Copyright 1995-2007 AEX Commercial Financing Group and Stephen Bush.

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Tags: business purchase, buying a business, loan terms, loan options, business loan, current interest rate, commercial mortgage, small business opportunity, commercial real estate, business property, business financing, amortization period, commercial borrowers