Introduction
When it comes to buying a business, most buyers know they’ll need financing — but few fully understand the different types of acquisition loans available. Choosing the right financing option can mean the difference between a smooth closing and a failed deal.
At Yaw Capital, we specialize exclusively in business acquisition financing. Here’s a clear breakdown of the three main loan options buyers should know: SBA loans, traditional bank loans, and alternative lenders.
SBA Acquisition Loans
The SBA 7(a) and SBA 504 programs are the most popular for deals under $5M.
- Advantages: Lower down payments (10–20%), long repayment terms (10+ years), and flexibility in how funds are used.
- Best For: First-time buyers or entrepreneurs acquiring businesses with stable cash flow.
- Challenges: Documentation-heavy process; lenders may be cautious about certain industries.
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Bank Loans (Senior Debt)
Traditional bank loans remain a cornerstone of acquisition financing for deals above $5M.
- Advantages: Larger loan sizes, competitive rates for qualified borrowers.
- Best For: Buyers with strong credit, collateral, and acquisition targets with proven performance.
- Challenges: Conservative underwriting; banks often require significant equity and guarantees.
Alternative Lenders
When SBA or bank loans aren’t a fit, alternative lenders can step in.
- Advantages: More flexible underwriting, faster approvals, and willingness to finance unique deal structures.
- Best For: Buyers needing quick financing or those acquiring non-traditional businesses.
Challenges: Higher cost of capital.
Conclusion
There’s no one-size-fits-all solution. The right business acquisition loan depends on deal size, industry, buyer profile, and timing. Yaw Capital helps you compare SBA, bank, and alternative options so you can move forward with confidence.
