Even the most risk-averse professionals are likely to agree that buying an established business with borrowed money is a safe bet. After all, if the business is already thriving, paying back the loan should be relatively easy, right? Although this idea is sound in theory, there are no guarantees in life. In reality, financing anything is risky. If you know the true cost of borrowing money, though, you can make strategic financial decisions that ultimately work in your favor and pay off in a major way. 

Understanding Interest Rates 

Business loans are like any other type of financing in that the interest rate will depend on a variety of factors. These rates can range from as low as 2.5% to as high as 71%, but there are always outliers on both ends of the spectrum. In most cases, larger loans will have lower interest rates, while smaller amounts will have higher ones.

If you’re planning on taking out a loan to help with buying an established business, it’s important to remember that interest rates on virtually all financial products are on the rise. Therefore, any calculations you do now regarding the company’s potential budget will not be applicable in six months, when rates are even higher. Depending on how long due diligence takes, renegotiating for a better deal may be necessary. 

Understanding Other Fees

Unfortunately, interest rates are not the only fees that come with business loans. Many lenders charge an origination fee and a monthly processing fee, which can be substantial over the life of the loan. If you are shopping around for the best deal and find one loan that has a much lower rate than all the others, read the fine print. There may be additional charges that will ultimately cost more in the long run than a higher-interest loan with no fees. 

If you’re thinking about buying an established business, turn to Zoellner Garten & Company 

Even the most risk-averse professionals are likely to agree that buying an established business with borrowed money is a safe bet. After all, if the business is already thriving, paying back the loan should be relatively easy. Right? Although this idea is sound in theory, there are no guarantees in life. In reality, financing anything is risky. If you know the true cost of borrowing money, though, you can make strategic financial decisions that ultimately work in your favor and pay off in a major way. 

Understanding Interest Rates 

Business loans are like any other type of financing in that the interest rate will depend on a variety of factors. These rates can range from as low as 2.5% to as high as 71%, but there are always outliers on both ends of the spectrum. In most cases, larger loans will have lower interest rates, while smaller amounts will have higher ones.

If you’re planning on taking out a loan to help with buying an established business, it’s important to remember that interest rates on virtually all financial products are on the rise. Therefore, any calculations you do now regarding the company’s potential budget will not be applicable in six months, when rates are even higher. Depending on how long due diligence takes, renegotiating for a better deal may be necessary. 

Understanding Other Fees

Unfortunately, interest rates are not the only fees that come with business loans. Many lenders charge an origination fee and a monthly processing fee, which can be substantial over the life of the loan. If you are shopping around for the best deal and find one loan that has a much lower rate than all the others, read the fine print. There may be additional charges that will ultimately cost more in the long run than a higher-interest loan with no fees. 

If you’re thinking about buying an established business, turn to Zoellner Garten & Company in Cincinnati. Their business consultants serve clients throughout Ohio and Northern Kentucky. For twenty years, they have been helping entrepreneurs navigate complicated transactions, including buying, selling, and merging companies. From conducting business appraisals to facilitating mergers and acquisitions, they do it all. To reach out and discuss your needs, visit their website or call (513) 852-2400.