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Mar 26, 2018 at 07:00 AM

Small Business Finance - Four Considerations Before Obtaining a Business Acquisition Loan

By Alexandra Trujillo
Small Business Finance - Four Considerations Before Obtaining a Business Acquisition Loan

Becoming an entrepreneur can have different steps. You can either start from scratch or purchase an existing business. Whichever you decide to do, it is important to keep a few things in mind. For example, you will want to make sure you are passionate about a product or service. This article provides a few other tips that will benefit anyone who is unsure about what to look for when venturing into the entrepreneurial world.

 

Aspiring entrepreneurs have two options when they decide to pursue the American Dream of business ownership: start one from scratch or purchase an existing business.

Many companies start with an entrepreneur’s great idea, such as Uber, the app that connects people looking for rides with independent contractor drivers who often charge lower rates than traditional yellow taxis or limousine drivers.

Other budding entrepreneurs look for opportunities to purchase existing businesses. Doing so eliminates many of the headaches and startup costs that come with launching a new venture. These challenges include bidding and selecting contractors, sourcing supplies, building a customer base from scratch, creating a brand and hiring staff.

Buying an established business might not seem as exciting, but it could be just as lucrative and a lot less risky than creating a new company. Due diligence is required. It is important to find out why a business is up for sale. If the company is struggling to pay its bills, that is surely a bad sign. However, if an original owner is contemplating retirement and his or her children are not interested in continuing in the family business, it might come at a good price.

For many reasons, buying a business is a lot less risky than funding a startup that has no track record of success. Purchasing an established company likely means there is already a base of customers, trained staff and operational success (if the firm has been in business for more than two years). Perhaps a few changes are all that would be needed to take a mediocre business to the next level.

An important thing to keep in mind is that it will likely be easier to obtain the funding to buy an existing business than it would be to secure startup capital.

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Posted in Small Business Financing.







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