With increasing consumption of goods and services, many people are starting their businesses to make use of the increase in buying power among many people in the country. Some of them are starting their businesses from scratch, while others are buying a pre-existing business through acquisitions. Either way, starting a business is not a simple undertaking. Everything requires vigorous planning, resources, and management skills.
However, buying a pre-existing business is one of the most complex startup processes. There is no doubt you will get an already working company that is already established in the industry, but you will have to part with considerable amounts of money.
Sometimes buying a business is tough and you might consider looking for a loan to buy a business and formulate a financial strategy to pay the loan in the future. There are other loan requirements before buying a company which has been discussed below.
- Business Plan
You are already wondering why you need a business plan while the business you intend to buy is already working. However, a business plan is a necessity as the current owners of your business will be interested in your working plan.
You need to come up with a strategy that shows how your business will approach various aspects such as marketing, maneuver government policies, and deal with industrial competition. For better chances of success, you need to have a polished business plan.
- Signed Letter of Intent
A signed letter of intent is one of the legal documents that you will need to have to show your interests in buying a particular business and the associated prices. Practically, a letter of intent is not a binding purchase agreement.
However, it is a useful document in setting other aspects of acquisition in motion. For example, you can use it to start the loan application while at the same time solving other aspects of business acquisition.
- Financial Documents
You are preparing to acquire a business, and as such, you will be required to submit various financial documents. Personal tax returns, business income returns, and financial statements related to your business must be presented.
These are the documents that will highlight your overall financial stability. They will also indicate whether you follow the legal guidelines of submitting your tax returns. You can hire a professional accountant to prepare all these businesses for you.
- Good Credit Score
Credit score defines whether you are good in paying debts or not. Trends from the lending institutions show that you need to have a credit score of 680 or something better for you to stand a chance of accessing business loans. A considerable amount of money is at stake, which means you have to prove to the financial organizations that you will pay such debts without challenges.
As you have seen, you can start a business without challenges. However, buying a pre-existing business requires a lot of money, which you might not be able to get from your savings. There are several loan options out there for you. However, you must be prepared to present the necessary documents.