These are the most common methods to finance a transaction:
SBA Financed: The 7(a) SBA program is a very popular way to acquire a business with as little as 10% down. Sunbelt of Florida works with about a dozen preferred lenders who do not need to go to the SBA for approvals. Instead, they can approve the loan applications in-house. Sunbelt is well versed in which banks are best for which industries. This is not a one-size-fits-all scenario. Please work through your Sunbelt advisor to get yourself pre-approved before you begin looking at opportunities.
Conventional Financing: This option is best for large companies who are buying a smaller “plug-and-play” business to move into new markets or add new services. Often times a Line of Credit is used along with the cash on the balance sheet.
Using your 401K Account (ROBS): This is an often-overlooked finance option. A ROBS loan is a simple loan against your investment portfolio within your 401K. This is a perfect way for someone who has been working in Corporate America to move into entrepreneurship. You are permitted to borrow up to 75% of your portfolio’s value while still keeping all of your investments in place.
Seller Financing: This is a great option for a business owner who wants to sell quicker and also has residual income coming in for a few years after the sale of their business. Buyers will oftentimes pay a slightly higher price if the Seller will carry a note for 30-50% of the sale price. The Seller gets a first lien on the business as security. This option is very popular with foreign buyers who do not qualify for an SBA loan.