How to Get an Instant Loan to Buy an Existing Business?

For many entrepreneurs, buying an established business seems like a more viable and practical way to enter the market than starting from scratch. The business already has traction, customers, and a way of working, so all it needs is new ownership to build on what’s already there. 

Since opportunities to buy an existing business don’t stay open for long, it is important to be ready with the right funding at the right time. Instant business acquisition loans can really help in arranging the total amount easily. Let’s understand how you can get an instant loan to buy another business. 

What is a Business Acquisition Loan? 

A business acquisition loan is a specific type of business loan provided to self-employed individuals and companies to purchase an existing business or acquire a significant stake in another firm. This loan provides the required principal amount to cover the cost of acquisition, the purchase of assets or shares, and the merger of business operations.

First-time entrepreneurs, existing business owners seeking to expand their operations, and investors looking to diversify their portfolios can apply for business takeover loans. Business acquisition loans can be collateralised or unsecured, depending on the lender. 

Read More: Everything You Should Know About Business Loans in India

Can Business Acquisition Loans Be Disbursed Quickly?

Loans for business takeovers often take longer to disburse, from a few weeks to months, because there’s more to verify and more at stake compared to a standard Business Loan. Here’s what makes it time-consuming:

• Dual evaluation process: Lenders assess both your financial profile and the performance of the business being acquired. 
• Detailed financial check: Detailed financial analysis, like reviewing past financials, cash flow, FST filings, and bank statements, takes time. 
• Involvement of multiple adversarial teams: Acquisition deals often involve investment banking, corporate banking, and financial advisors, and coordination can extend timelines. 
• Complex deal structure: Loans to buy another business can be structured using combinations, like bridge financing, mezzanine funding, or quasi-equity. 

So, if you need instant funds, business acquisition loans might not always be the quickest option, as they involve multiple checks and a more detailed approval process.

How to Get Instant Funds to Buy an Existing Business?

If speed is a priority when buying an existing business, a Business Loan is a much more practical option than a business acquisition loan. 

Business loans are designed to be flexible and are not tied to any specific transaction. So, it allows you to use the capital for multiple purposes, including buying an existing business. Since the evaluation is primarily based on your financial profile rather than the target business, the approval process is usually faster. 

However, it is important to remember that a Business Loan is not specifically structured for acquisition. It just offers speed and flexibility, helping you to move forward without any delays. 

Key Features of Instant Business Loans

Instant business loans are characterised by a quick approval and disbursement process, making them ideal for immediate finance needs. Unlike traditional business loans from mainstream banks, which may involve lengthy approval processes and complex paperwork, instant business loans make it much easier to access funds. 

Here are the key features of instant business loans: 

• Limited principal amount: The loan amount sanctioned under instant business loans (up to Rs. 80 Lakh) is typically lower compared to traditional business loans (up to Rs. 1-5 Crore). 
• Higher interest rates: Instant business loans (starting from 15%) have a higher interest rate as compared to traditional business loans (starting from 9%), and it varies from lender to lender. 
• Quick approval and disbursal: Funds can be approved and credited within 48-72 hours or within a week, depending on the lender. 
• Minimal documentation: The processing requires basic documents like bank statements, identity proofs for KYC, income proof, and address proof. 
• Unsecured funding option: No collateral is required in most cases, which makes it easier to get access to funds. 
• Digital application process: Most NBFCs and financial institutions have an end-to-end online process to approve instant business loans, with no need for branch visits. 

Read More: What is Minimum CIBIL Score Required for Business Loan

How to Apply for an Instant Business Loan?

Here’s a step-by-step procedure to apply for an instant Business Loan:

1. Create a list of lenders: Start by shortlisting reliable, RBI-approved lenders based on loan amount, speed, loan processing fees, and terms. 
2. Check your eligibility: Once you’ve shortlisted lenders, check their specific requirements around credit score, income, and business profile. 
3. Prepare the documents: As per the chosen lender, prepare the documents required for verification. Some lenders offer paperless verifications, such as Poonawalla Fincorp, which speeds up approvals through DigiLocker-based KYC and API-based business proof and GST fetch. 
4. Apply online: Fill out the application form on the lender’s website or app with accurate personal and financial details.
5. Complete the necessary verification: Complete the verification necessities, and upload any documents (if required). 
6. Accept the loan agreement: Carefully review the loan agreement and accept it after confirming the loan repayment terms. 

Within a day or two, the funds will be credited to your bank account. 

Read More: How to Manage Business Loans After You Receive Funding?

How to Use the Funds from Business Loans to Buy Another Business?

Here are some ways you can use the funds from instant business loans to take over another business:

• Pay the upfront acquisition cost: Use the loan to cover the agreed purchase price, either fully or partially, depending on the deal structure. 
• Bridge the funding gap: Combine your own capital with the loan to meet the total deal value, especially if the lender does not fund 100% of the purchase.
• Manage transition costs: Use funds for expenses during the ownership transfer, such as legal fees, registration charges, and advisory costs.
• Invest in immediate improvements: Allocate part of the loan to fix gaps, upgrade systems, or improve operations right after acquisition.

Remember, an instant Business Loan cannot help buy the business, but it helps you take control smoothly and keep it running without disruption. 

To Conclude

Purchasing an established business is a fast way to become an entrepreneur. Once you obtain financing to purchase your new business, you can start earning revenue immediately.
You will make a sound financial decision if you assess the target company, evaluate potential lenders, and understand the loan terms. By strategically financing the business acquisition, you will maintain positive cash flow as you grow.

To help you accomplish your dream business acquisition, Poonawalla Fincorp provides a Business Loan with hassle-free processing and flexible repayment options. This will help you move one step closer to owning your dream business. Apply now to get started.

FAQs

How long does it take to get a loan to buy another business?
Depending on your analysis and the lender, expect approval and funding within anywhere from hours to days if the lender is online.

Can I get a loan for a business takeover without collateral?
Yes, you may qualify for an unsecured loan based on your available credit history/ score.

What is the ideal credit score for a Business Loan?
A minimum of 700 increases your chances of approval and securing good interest rates.

Can I use the loan for both purchase and working capital?
Yes, you can structure your loan as you see fit, including acquisition and operational expenses.

Is it better to buy an existing business than start a new one?
All things being equal, acquiring an established business with an existing customer base and revenue stream has far less risk than simply starting a new company.