Head to head
Business acquisition financing vs Conventional business term loan
Buying a business is underwritten on the target's cash flow rather than yours, which is why it is usually an SBA 7(a) rather than a conventional term loan below $5 million.
| Business acquisition financing | Conventional business term loan | |
|---|---|---|
| Typical amount | $100,000 to $5 million+ | $25,000 to several million |
| Cost | SBA 7(a) rates for most deals under $5M | Prime + 1% to prime + 8%, credit-dependent |
| Time to funding | 60-120 days | 2-8 weeks |
| Term | Up to 10 years | 1-10 years |
| Relative expense | $ | $$ |
Cost bands are editorial judgements expressed in APR-equivalent terms so products quoting factor rates and discount fees can be compared with products quoting interest. They indicate relative expense, not quotes. Methodology.
Business acquisition financing
Usually chosen when
- The target has verifiable financials that service the debt
- You need ten-year amortisation to make the payment work
- Goodwill is a large part of the purchase price, which conventional lenders rarely finance
Conventional business term loan
Usually chosen when
- You already own a profitable business with collateral and are bolting on a small competitor
- The deal is small enough to fund from an existing relationship without SBA paperwork
Common questions
- Can I buy a business with no money down?
- Not with SBA financing. The equity injection is a rule rather than a lender preference, and the sources that can satisfy it are constrained.
Other comparisons
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