What lenders look for when financing a business acquisition

Buying an existing business takes more than agreeing on a price. For buyers seeking financing, the company’s earnings, the source of the down payment and the buyer’s ability to run the operation all become part of the lender’s decision.Larry Moran, managing director of Gulf Coast Small Business Lending, frames the process around two questions: Can the business support the proposed debt, and does the buyer understand what taking ownership will require?Those questions can help buyers evaluate an acquisition before they commit to a purchase, not simply prepare a loan application.Eligibility is only the starting pointThe Small Business Administration’s 7(a) loan program can finance complete or partial changes of ownership. Applicants must meet the program’s eligibility requirements, including creditworthiness and a reasonable ability to repay.Moran said lenders also examine the buyer’s financial position and the source of funds being contributed to the transaction. Recent bank statements,