Business Acquisition Loans: How They Work, Rates, and How to Qualify.
Acquisition financing is its own world. The structure you choose determines your interest rate, your personal guarantee exposure, your closing timeline, and whether you can refinance in five years. Here's the field guide.
Five loan structures, compared
| Structure | Rate | Down | Close |
|---|---|---|---|
| Conventional bank | 7 to 10% | 20 to 30% | 30 to 60 days |
| Seller financing | 5 to 8% | 10 to 30% | Closes with deal |
| Bridge loan | 10 to 15% | 15 to 25% | 7 to 21 days |
| Revenue-based | 9 to 20% effective | None | 24 to 72 hours |
When each structure wins
Conventional bank is best for buyers with a strong existing banking relationship and an acquisition target the bank already underwrites comfortably (existing customer, well-known industry).
Seller financing closes deals when other structures fall through. A motivated seller will finance 10 to 30% of the price at 5 to 8% interest, often standing behind senior debt.
Bridge loans fund acquisitions where you'll refinance into conventional debt within 6 to 12 months, used when timing forces a fast close.
Revenue-based capital fills working-capital gaps post-close, not the acquisition itself. Pair with seller financing for the purchase, RBF for first-90-day operating cash.
Lender requirements
- 3+ years of personal tax returns: lenders want to see your existing income, not just the acquisition target's.
- 3+ years of target business financials: taxes, P&L, balance sheet, A/R aging.
- Down-payment proof: 30 days of bank statements showing the equity injection is real.
Seven-step application process
- Pre-qualification: soft credit pull, target deal size, structure recommendation.
- Lender match: quote 3 to 5 lenders simultaneously for fastest term-sheet comparison.
- Application + docs: prepare the documents requested by the selected lender.
- Lender review: timing varies by lender and structure.
- Term sheet: focus on rate, term, prepayment, covenants, personal guarantee.
- Closing diligence: appraisals, legal, escrow, insurance binders.
- Funding + first payment: wire to seller and start the amortization schedule.
Common mistakes
- Shopping rate without shopping structure. A 0.5% rate difference matters less than 5 vs 10-year term.