For many small to medium businesses (SMEs), buying an existing business can be a faster and more reliable way to enter the market than starting one from scratch. Instead of building from the ground up, you are stepping into a business that already has customers, employees, workflows and operations. While you know the strategic benefit of purchasing an existing business, it can be challenging to raise capital while running your business.
Whether you are purchasing a thriving company or turning around a business that needs new leadership, the right financing enables you to secure the deal while positioning you for success. This guide will walk you through why businesses choose to buy existing businesses, the types of loans available, what lenders look for, and how you can make the financing process as smooth as possible.
Why SMEs Choose to Buy an Existing Business
Buying an existing business can be a smart growth strategy. Instead of waiting months or years to build a customer base, you start with a foundation that already exists.
There are several key advantages:
Established Customer Base
An existing company already has paying customers, brand recognition, and possibly recurring contracts. This reduces the uncertainty of launching a new business where you’d need to build awareness and loyalty from the ground up.
Proven Business Model
The company has a track record of operations. Its revenue streams, profit margins, and expenses are known and this makes financial forecasting more reliable and lowers the risk compared to testing an unproven idea.
Existing Infrastructure and Workforce
The business already has equipment, systems, suppliers, and employees in place. This saves time and money compared to setting everything up from scratch, allowing the new owner to focus on improving operations instead of starting them.
Easier Access to Financing
Lenders and investors are often more willing to finance the purchase of an existing business because they can evaluate its financial history. Startups, by contrast, face more difficulty securing funding due to lack of performance data.
Best Types of Business Loans for Buying a Business
When it comes to acquisition financing, there is no one-size-fits-all solution. The right loan depends on the type of business you are buying, your financial “resume”, and how quickly you need access to funds. Fast Business Financial specializes in flexible funding options designed to help businesses move quickly on opportunities. Here are some of the most effective options.
- Working Capital Loans: Offered by online lenders, banks, and alternative financing companies, these loans are ideal for covering early-stage operating expenses once you’ve purchased the business. Payroll, rent, and vendor payments don’t stop while you are transitioning ownership, and this type of loan ensures you have the cash flow to keep things steady.
- Short-Term Business Loans: Provided mainly by online lenders and some traditional banks, these loans offer quick access to capital during the purchase process. They are structured for speed, making them well-suited for buyers who need to close quickly and don’t want to be slowed down by months of paperwork.
- Business Lines of Credit: Available through banks and credit unions, this type of funding offers ongoing flexibility. After buying the business, there are often unexpected costs such as repairs, marketing, or inventory restocking. A line of credit allows you to draw funds as needed, repay, and borrow again.
- Revenue-Based Financing and Merchant Cash Advances (MCAs): are strong choices for buyers with businesses that have consistent sales or strong digital revenue streams. Repayments are tied to revenue, which makes them more manageable during seasonal fluctuations.
Traditional financing options are also available for business acquisition.
- Small Business Administration (SBA) 7(a) Loans – SBA 7 (a) loans are one of the most common types of business acquisition loans. They are US Small Business Administration-backed, offer favorable repayment terms, and can cover both the purchase price and working capital needs. However, they require strong credit, detailed business plans, and weeks of underwriting (Fast Business Financial offers SBA support with years experience navigating this challenging process).
- Conventional Bank Loans – Provided directly by traditional banks and credit unions, these loans are another option, but they typically require excellent credit, significant collateral, and a lengthy approval process.
What Lenders Look for in Acquisition Loans
Every lender has its own criteria, but most look at a few core factors before approving business loans for buying an existing business.
- Loan amount vs. valuation – inflated purchase prices raise concerns.
- Financial health – last 1–3 years of records reviewed closely.
- Buyer’s experience – industry knowledge boosts lender confidence.
- Projections & transition – strong plans can offset limited experience.
- Credit & down payment – solid credit and upfront investment show commitment.
While traditional lenders may heavily weigh these factors, alternative lenders often consider revenue potential, cash flow and simplified documentation. This, in turn, allows deals to move forward that might otherwise stall.
Tips for a Smooth Financing Process
The financing process can feel overwhelming, but preparation can alleviate a lot of the pain points.
- Gather all relevant financials upfront. Profit and loss (P&L) statements, tax returns, and records of accounts receivable and payable give lenders the information they need to evaluate the deal.
- Have a clear transition plan. Identify which employees and managers are staying on and outline how you will step into operations. This reassures lenders that the handover will be stable.
- Be transparent about how you’ll use the funds. Whether the loan goes toward the purchase price, working capital, or expansion, lenders want to see that you are allocating resources responsibly.
- Move quickly and avoid delays. The best opportunities don’t stay on the market for long. Working with a lender that specializes in fast business acquisition financing ensures you can close the deal on time.
Turn Opportunity Into Ownership
Buying an existing business should be a competitive and strategic advantage for SMEs With the right financing, you can secure ownership and position yourself to improve, scale, and grow.
Business loans for buying an existing business are not all the same. From working capital loans and short-term financing to SBA loans and lines of credit, each option serves a unique purpose. The key is finding the loan that matches your timeline, your financial position, and your vision for the business.
FAQs
Can I get a loan to buy a business with no money down?
Although rare, some lenders may work with partial seller financing. Most lenders, however, require some level of buyer investment.
How fast can I get funding?
With Fast Business Financial, you could get approved and funded within 24 to72 hours, depending on the loan type and application strength. Traditional lenders, unfortunately, can take weeks to approve your funding.
What credit score do I need?
Traditional lenders often require a credit score of 680+, but alternative lenders may approve deals with fair credit if revenue and cash flow look solid.
Do I need a business plan?
You will need a business plan for the SBA and traditional bank loans. However, Fast Business Financial doesn’t always require one. You still need to inform how the funds will be used and how the business will be managed.
What if the business I want to buy has debt?
While it’s not necessarily a deal breaker, it will impact the loan structure and repayment plan. Ideally, you should be prepared to explain how you’ll handle existing obligations.
Fast, Flexible Funding Just a Click Away
Ready to take the leap? Fast Business Financial offers fast, flexible business loans for buying an existing business so you can secure the deal and start strong. Apply today and get a decision in as little as 24 hours.