Buying an existing business can be one of the fastest ways to grow, especially if the company already has steady revenue, loyal customers, and proven operations. Momentum in dealmaking is strong: global merger and acquisition activity rose by 10% in the first 9 months of 2025 compared with the same period a year earlier. The challenge is figuring out how to finance a business acquisition without draining your capital or slowing down the deal.

That’s where business acquisition loans come in. These loans give you the funding to buy a company outright, cover closing costs, and set yourself up to operate and grow from Day 1. From government-backed business acquisition loans with longer terms to bridge loan options, the right financing structure can make an ownership transfer easier and more sustainable.

Below, we’ll explain business acquisition financing: how it works, the main types of loans available, and the steps to secure the right funding for your next acquisition.

What’s in this article?

• What is a business acquisition loan?
  
• How does business acquisition financing work?
  
• What are the main ways to finance a business acquisition?
  
• What types of business acquisition loans are available?
  
• How do SBA business acquisition loans work?
  
• What are non-government-backed acquisition loans?
  
• What is a bridge loan for business acquisition?
  
• How can you get a business acquisition loan (step by step)?
  
• How Stripe Capital can help
  

What is a business acquisition loan?

A business acquisition loan is financing that helps you buy an existing company that has cash flow, customers, and operations already in place.

Typically, you get a lump sum up front, then repay it with interest over time. The funding can cover the purchase price plus related costs such as legal or broker fees. Lenders often secure the loan with the business’s own assets (equipment, property, or inventory) and sometimes ask for personal guarantees, depending on risk.

How does business acquisition financing work?

Financing a business acquisition works a lot like getting a mortgage, but the asset is the business itself. Because the lender can see proven performance data, buying an existing business is often easier to finance than starting one from scratch.

Here’s what lenders examine in practice:

• Your financial profile: Lenders evaluate your credit score, financial history, and experience running or managing a business. They want evidence that you can lead the company successfully and handle debt responsibly.

• The business’s financials: They’ll review revenue, profits, existing debt, and cash flow through financial statements and tax returns to ensure the company can comfortably support loan payments.

• The purchase price and valuation: Expect lenders to confirm whether the agreed price matches the business’s real market value before they approve the loan.

• Down payment: Lenders typically expect buyers to contribute some of their own capital towards a portion of the total price to show commitment and reduce risk.

• Collateral: Loans are often secured by the business’s assets and sometimes by personal guarantees.

What are the main ways to finance a business acquisition?

Buyers commonly combine several sources to get the right mix of cost, control, and flexibility.

Here are the main options:

• Business acquisition loans: Traditional term loans provide a lump sum to cover most of the purchase price, repaid over a few years with interest. Business acquisition loans are the keystone of many acquisitions.

• Seller financing: The seller acts as the lender for part of the price, letting you pay them back over time. This can close funding gaps, and it shows the seller’s confidence in the business. But you’ll need to negotiate terms carefully.

• Personal funds: Using savings or investment proceeds can strengthen your application and decrease borrowing needs. However, tying up too much of your own cash can limit flexibility later.

• Investor or partner funding: Bringing in investors or partners can provide capital without debt, but that means sharing ownership and future profits.

• Alternative financing: Fintech solutions like Stripe Capital can provide quick access to funds based on business performance.

What types of business acquisition loans are available?

Business acquisition loans fall into a few categories. Each is designed for different kinds of buyers and timelines.

Here are the main options:

• Government-backed acquisition loans: Publicly supported lending programs that typically offer longer repayment terms and more flexible eligibility for qualified buyers. In the US, Small Business Administration (SBA) acquisition loans are a common example.

• Non-government-backed business acquisition loans: Conventional bank loans or online financing options, usually available to borrowers with strong credit profiles, established cash flow, and sufficient collateral.

• Bridge loans: Short-term business loans used to close a deal quickly before long-term funding is in place.

How do SBA business acquisition loans work?

SBA business acquisition loans are a common way to finance the purchase of an existing business in the US. Banks and other approved lenders issue them, and the SBA guarantees up to 85% of these loans. That guarantee reduces risk for lenders, which means better terms for borrowers.

Here’s what defines SBA business acquisition loans:

• Loan structure: The SBA 7(a) program is the primary option for acquisitions. It provides up to $5 million in financing, typically with 10-year repayment terms (or up to 25 years if real estate is included).

• Interest rates: Rates are generally tied to the prime interest rate plus a margin. They’re often in the single or low double digits, depending on the market and your credit profile.

• Down payment: You’ll usually contribute about 10% of the purchase price, although lenders might ask for more based on risk.

• Collateral and guarantees: The loan is typically supported by available business assets and usually requires a personal guarantee. While limited collateral doesn’t automatically disqualify an application, lenders and guarantors will generally expect borrowers to pledge reasonable assets, if available.

• Application process: You’ll apply through an SBA-approved lender, submit detailed financials for both you and the target business, and include a business plan that shows how you’ll operate and repay the loan.

• Longer wait times: SBA loans can take longer to close, often from a few weeks to a couple of months, but their longer terms and lower rates make them one of the most affordable ways to finance a business purchase.

Other countries have similar types of government-backed acquisition loans that non-US businesses can take advantage of for terms more favorable than those of traditional bank loans.

What are non-government-backed acquisition loans?

Not every business purchase qualifies for a government-backed loan, and some buyers prefer a faster or more simplified approval process. That’s where non-government-backed acquisition loans come in. These are provided by banks, credit unions, and private or alternative lenders without public guarantees.

Here are some common types of non-government-backed acquisition financing:

• Conventional bank loans: These often resemble government-backed loans in structure but typically require stronger credit profiles, more collateral, and larger equity contributions. Repayment terms are usually shorter, which can result in higher monthly payments but a quicker path to full repayment.

• Online or alternative lenders: Private, nonbank, and fintech lenders often move more quickly and, in some cases, assess applications based on cash flow and operating performance rather than asset coverage alone. Approvals can happen in days rather than weeks. The trade-off is usually cost, with higher interest rates and shorter terms.

• Personal or home equity loans: For smaller acquisitions, some buyers use personal loans or home equity borrowing to fund part of the purchase. While this can simplify the process, it links the acquisition to personal assets and increases individual financial exposure if the business underperforms.

What is a bridge loan for business acquisition?

A bridge loan is short-term financing that helps you close a business purchase quickly while you wait for longer-term funding to finalize. It’s designed for speed, not longevity. The timeline is usually 6–12 months, sometimes up to 2 years. And it comes with higher interest rates, often between 6% and 12%, which reflect the short duration and quick access to capital. Collateral is often obtained by business or personal assets such as real estate.

These are best used when timing is important—for instance, when you’re attempting to buy a business before competitors or before a government-backed loan closes.

How can you get a business acquisition loan (step by step)?

Getting a loan to buy a business takes planning, preparation, and persistence.

Here’s how to work through the process:

• Evaluate the business: Review its financial statements, tax returns, customer metrics, and assets. Ensure the business can generate enough cash to cover loan payments and still be profitable.

• Build a business plan: Lenders want to see how you’ll run the company and grow it. Include a summary of operations, market position, and three to five years of financial projections.

• Check your finances: Know your credit score, available cash, and collateral. Lenders expect borrowers to demonstrate creditworthiness by way of a clean credit history.

• Gather documents: Collect your personal tax returns, bank statements, and financials for the target business. You’ll also need a valuation, purchase agreement, and legal paperwork.

• Compare lenders: Talk to multiple banks or alternative lenders. Ask about rates, repayment terms, and required down payments. Choose one with acquisition experience and good communication.

• Apply and follow up: Submit your full loan package and respond quickly to lender questions. The underwriting process can take weeks, but each situation is different.

• Close the deal: Once your application is approved, you’ll finalize the loan, transfer funds to the seller, and sign all purchase documents.

How Stripe Capital can help

Stripe Capital offers revenue-based financing solutions to help your business access the funds it needs to grow.

Capital can help you:

• Access growth capital faster: Get approved for a loan or business cash advance in minutes—without the lengthy application process and collateral requirements of traditional bank loans.

• Align financing with your revenue: Capital’s revenue-based structure means you pay a fixed percentage of your daily sales, so payments scale with your business performance. If the amount that you pay through sales doesn’t meet the minimum due each payment period, Capital will automatically debit the remaining amount from your bank account at the end of the period.

• Expand with confidence: Fund growth initiatives such as marketing campaigns, new hires, inventory expansion, and more—without diluting your equity or personal assets.

• Use Stripe’s expertise: Capital provides custom financing solutions informed by Stripe’s deep expertise and payment data.

Learn more about how Stripe Capital can fuel your business growth, or get started today.