Acquisition Loan for Businesses in the United States
Financing tailored to your deal dynamics—not the other way around. Accrefi connects you with lenders who can structure financing options around your acquisition parameters.
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Funding for Business Acquisitions
Maximize Return on Equity and IRR
Amplify Buying Power
Use in Conjunction with Seller Financing
Secure Your Acquisition Loan Now!
Lending Parameters for Acquisition Loans
Term Length & Structure
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12 – 60 months depending on lender and deal structure
SBA Loans: 10,15, or 25 years dependent on collateral type
Eligibility
Based on proforma combined company’s financials. Limited operating history not a constraint
If buyer is a financial buyer, then based on seller’s financials + buyer’s equity contribution
Loan Amount
$2,000,000 – $50,000,000+
Parameter
Details / Typical Range
Underwriting Criteria
Collateral
Cash flow
Sponsor backing
Buyer’s financial strength
For SBA Loans: personal guarantee
Use of Funds
Acquisition of target, closing costs, and working capital
Delayed draws allow future growth and bolt-on M&A
Security
Senior secured
Some 2nd-lien options available
Blanket lien on all business assets
Seller financing will have to subordinate
Covenants
Typically 2.5–3.0x senior leverage ratio
FCCR 1.10–1.40x
Other customary restrictions
Time to Funding
For smaller loans $2,000,000–$5,000,000: 4 to 6 weeks
For +$5,000,000 loans: expect at least 6 weeks
Large loans take longer, and require quality of earnings report and/or GAAP compliant financials
Typical Providers
Banks
SBA Preferred Lenders
Senior Secured Lenders
SBIC Funds
Mezzanine Funds
Family Offices
Event Driven Lenders
10-30% cash equity at close;
Seller’s rolled equity does not count towards this amount
Interest Rates
Varies widely by lender
Cash + PIK options available
Warrants if execution risk is high
Principal / Amortization
Common to have interest-only and backloaded amortization
Process
Pre-pitch deal with short list to obtain early read of acquisition financeability
Commence search for acquisition loan after preliminary terms have been agreed upon between Buyer + Seller
Seller‘s financial information needed for underwriting.
Proforma combined company model is critical for lender’s diligence
What People Have Been Saying
Who Is Business Acquisition Funding for?
Acquisition loans for business are ideal for United States companies looking to grow through strategic purchases. Typical candidates include:
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Founders & Entrepreneurs growing inorganically through acquisition of competitors or complementary companies
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Independent Sponsors and Search Funds acquiring new portfolio companies or executing tuck-ins
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Established Companies using rollups to accelerate growth faster than organic market penetration
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Strategic Acquirors seeking to compartmentalize risk to a specific business unit
Accrefi connects your business with trusted lenders and financing options to make the process smooth and efficient
Types of Acquisition Financing Options
Accrefi offers a variety of business acquisition financing solutions to support United States companies in securing their next acquisition.
Conventional Acquisition Loans
A conventional acquisition loan can be an asset-based loan, a cash-flow loan, a mezzanine loan or a structured option. The main difference between these loans when used to consummate an acquisition compared to general business operations is that the use of funds carries a different risk degree, and therefore must be underwritten differently. This will impact interest rates, loan repayment, and term length.
A common feature of acquisition financing is that principal amortization is low in Years 1-2 (0-10% per year), followed by a ramping schedule or a bullet payment at the end.
SBA Loans
The SBA has two types of loans that are purpose built for small business acquisition financing: the 7(a) and 504 loan.
SBA 504 loans are used to finance building, land, heavy equipment, and other tangible assets in an acquisition. SBA 7(a) loans can be used for businesses without fixed assets.
A benefit of using SBA loans versus other types of loans are the long maturity (+10 years) and high loan to value (up to 90%). The drawback is the requirement of a personal guarantee.
Note: SBA loans cannot be obtained by applying to the SBA directly, but rather through one of the SBA’s preferred lenders.
Bridge or Short-Term Acquisition Loans
Short-term acquisition financing options mature in 36 months or less. The lender originates the loan with an expectation of being refinanced in the short-medium term.
This option will carry a higher cost of capital, but can be used when an expeditious closing is needed (i.e. the purchase price is just too good to pass up) and/or a full data room cannot be provided, forcing a lender to address gaps in due diligence via shorter maturities or higher lending costs.
Benefits of an Acquisition Loan for Business
Secure the capital you need to grow your business through strategic acquisitions.
Strategize Before the LOI
Most buyers issue a letter of intent (‘LOI’) to the seller before they think about how to finance their acquisition. The right approach is to understand the financeability of the target before you issue your LOI so that you can architect the right purchase price & structure. The parameters of the acquisition loan erect the baseline guardrails for your deal with the seller.
You Know What You Are Buying
Organic growth via new market penetration involves a lot of unknowns. But when you buy a competitor, you tailor the business acquisition financing to your deal because you know what you are buying. The cash flows, collateral, seasonality, customer concentration, and level of business risk are known or estimable.
Maximize Your ROE and IRR
Maximize your return on equity and IRR by investing only as much equity capital as needed, and using non-dilutive capital to fund the rest.
Stay in the Driver Seat
Partnering with the right business acquisition lender will ensure you can operate the acquired business according to your vision and retain decisioning rights.
Acquire Larger Deals
Acquisition loans magnify your purchasing power and enables you to identify acquisition targets that would normally be too large without the use of a strategic capital partner.
Why Choose Accrefi for Business Acquisition Funding
Accrefi simplifies access to business acquisition financing by connecting your company with top business acquisition lenders and guiding you through every step of the process.
As former bankers, we help you shape the narrative: normalized EBITDA, adjustments, cohort retention curves, forward projections, and pro-forma leverage / fixed charge coverage of the combined company. But this process needs to be started early in order to identify the optimal acquisition financing options for your purchase.
Expert Guidance Starts Before the LOI Phase
Acquisition Loans Are the Hardest Loans to Place
Because of the different risk profile of an acquisition loan, and because the collateral or cash flows from the target company securing the acquisition loan are not yet under the ownership of the buyer during underwriting, acquisition loans are the most complex and difficult to close.
Successfully closing upon the financing needed to fund an acquisition requires relentless coordination across a plethora of parties: the buyer, the seller, the sellside investment bank or broker, three different law firms, the accounting or quality of earnings firm, and the lender. Your deal hangs in the balance as the intricacies of a multi-party process must be perfectly synchronized.
Coordinating Between Multiple Parties
Deep Network
Our team can tap into a pool of acquisition financing providers for small businesses and midmarket businesses that is unmatched.
