Frequently asked questions

What is a business acquisition loan?

A business acquisition loan is a financial product designed to assist small and medium-sized enterprises (SMEs) in acquiring an existing business. Whether you seek to expand into new markets, diversify your portfolio, or acquire a competitor, this financing solution enables you to purchase a business outright or invest in a franchise location. Rather than starting a business from the ground up, an acquisition loan allows you to benefit from an established operational model, customer base, and brand, ensuring a smoother transition and faster growth in the Spanish market.

How do I qualify for a business acquisition loan?

When applying for a business acquisition loan, lenders evaluate a range of criteria to determine your eligibility. The specific requirements may vary depending on the type of loan you are applying for. For instance, a term loan, such as one backed by the ICO, typically requires a minimum down payment. On the other hand, a line of credit may place more emphasis on your business’s revenue, profitability, and cash flow. Additionally, lenders will consider factors such as your credit score, the time your business has been operating, and the financial health of the business you intend to acquire. Tailoring your application to meet these requirements can improve your chances of securing the loan.

How do I get a loan to buy a business?

Securing a loan to buy a business typically requires meeting several key criteria. Lenders will assess your credit history, the financial health of your business, and your revenue. However, when purchasing an existing business or franchise, additional factors are considered to ensure the business is a viable investment and that you can repay the loan.

Here’s what you can expect when applying for a business acquisition loan in Spain:

• Credit review: Lenders will review both your business credit report and the personal credit reports of any partners with a 20% or greater ownership stake. This helps assess your financial reliability.
• Revenue and debt evaluation: Lenders will evaluate your business’s revenue and existing debt obligations to ensure you can handle the loan payments and any new debt associated with the acquisition.
• Use the Services in violation of any law or regulation.
• Minimum down payment: Some loans may not require a down payment, while others, especially term loans, might ask for a deposit ranging from 10% to 15% of the loan amount.
• Business plan: Most lenders will require a detailed business plan that outlines how you intend to use the loan to acquire and grow the business, and how you plan to expand your operations post-purchase.

Where can I get a business acquisition loan in Spain?

Business acquisition loans in Spain can be obtained from a range of financial institutions, each offering different conditions and benefits. It's crucial to understand where to apply to find the best financing solution for your acquisition goals.

• Banks and savings banks (Cajas de Ahorros): Spanish banks, including both national and regional banks, offer competitive rates for business loans, including acquisition loans. However, they typically have strict requirements, such as a minimum credit score, at least two years of business activity, and a significant down payment. They also tend to offer more conservative loan amounts and longer processing times.
• Government-backed loans: In Spain, government-backed financing options, such as those provided through ICO (Instituto de Crédito Oficial), offer more favorable terms, including lower interest rates and extended repayment periods. While these loans are attractive due to their favorable conditions, they may have more rigorous eligibility criteria and longer approval times.
• Online lenders and alternative financing platforms: Online lenders in Spain may offer more flexible terms and quicker access to funds compared to traditional banks. They typically have lower credit score requirements and faster approval processes. However, the trade-off is that online loans may come with higher interest rates and less flexible repayment conditions. These lenders can be ideal for businesses needing rapid access to funds for acquisitions but willing to accept higher costs.

By understanding your options, you can choose the most suitable lender for your business acquisition needs in Spain.

What are the pros and cons of getting a business acquisition loan?

What are the pros and cons of getting a business acquisition loan? Like all forms of financing, business acquisition loans come with both advantages and potential drawbacks. Understanding these can help you make an informed decision.

Pros

• Flexible collateral requirements: Many acquisition loans in Spain may not require additional collateral beyond the assets of the acquired business itself. This can be a major advantage if you want to retain your working capital.
• Variety of financing options: There are several financing structures available, such as term loans, lines of credit, and government-backed loans, offering different terms that can be tailored to your needs and business situation.
• Preserve cash flow: Acquisition loans help you expand your business without using your own capital, allowing you to maintain cash flow and invest in other areas of your operations.
• Skip the startup stage: Acquiring an existing business means you get to bypass the risks and uncertainties of starting from scratch. You'll inherit a customer base, established processes, and revenue streams.

Cons

• Strict eligibility criteria: Getting approval for a business acquisition loan in Spain can be challenging if your business doesn’t have a strong credit history or stable financials. Lenders typically look for a good credit score and at least two years of business experience.
• High interest rates: Depending on your credit profile and the lender, interest rates on business acquisition loans may be high, impacting your long-term profitability. It’s important to carefully compare loan offers to ensure the terms work for your business.
• Possible down payment requirements: Many lenders will require a down payment for business acquisition loans, especially for larger amounts. This could range from 10% to 30% of the loan amount, depending on the financing structure and your business’s profile.
• By weighing these pros and cons, you can determine whether a business acquisition loan aligns with your business goals and growth strategy in Spain.

How much money can you borrow to buy a business?

Business acquisition loan amounts typically range from 10,000€ up to 5,000,000€. The exact amount you can borrow depends on several factors, including your credit score, business revenue, and existing debt. Lenders will carefully review these criteria to ensure that your business can comfortably handle the additional loan payments while continuing to operate effectively.

How do I buy a business with no money?

To buy a business with no money down, consider loan options that don’t require an upfront payment, such as lines of credit or revenue-based loans. These types of financing allow you to acquire a business without needing substantial capital initially. It’s important to compare different loan structures from various lenders to find the most suitable option for your needs, and platforms like Lendio can help connect you with a wide range of options.

How hard is it to get a loan to buy a business?

At Plettora, we strive to make the business acquisition loan process as straightforward as possible. Our application is quick and easy, taking only 15 minutes to complete. You’ll receive a fast response, and once approved, funding can be deposited into your bank account within 24 hours. We aim to simplify the process and help you move forward with your business acquisition efficiently.

What are some alternative sources to get a business acquisition loan from?

In addition to traditional lenders, there are several alternative funding sources for business acquisitions. These include:

• Angel investors: Individuals who provide capital in exchange for equity or debt, often at an early stage of the business acquisition.
• Crowdfunding: Platforms where many investors pool funds to help you buy a business, offering a flexible way to raise capital.
• Private equity firms: These firms may invest in your business acquisition in exchange for a stake or control of the company.
• Each alternative source has its own terms and considerations, so it’s essential to carefully evaluate them to ensure they align with your goals and financial capabilities.