December 9, 2019

How an Acquisition Loan Calculator Can Help You Make Better Financial Decisions

If your business is looking to purchase new assets and your own financial resources aren’t quite enough to make the cut, you’ll want to apply for an acquisition loan. Acquisition loans are somewhat unique in that they are valid exclusively within a very narrow timeframe. That is to say, they must be applied for, approved, and used within an allotted period specified in the application. 

As noted by Investopedia, it’s generally better to use an acquisition loan to purchase tangible assets. While you can feasibly apply for an acquisition loan to augment your operating budget or release a new product, you’re less likely to receive favorable terms if you do. And that’s assuming you’re even approved in the first place. 

Lenders prefer having something that can be used as collateral in the event that you default on the loan. And if you’re applying for an acquisition loan without planning to purchase an asset, that means offering up something your business already owns.  As such, if you need short-term capital for recurring costs, you’re better off either opening a corporate line of credit or applying for a different type of loan.

How to Find the Right Acquisition Loan

You’re also probably better off doing so if the equipment you need to purchase costs less than a few thousand dollars. Acquisition loans should be reserved for major expenditures like real estate or the purchase of another company.  In the case of the latter, you’ll be bringing in outside expertise by necessity. 

Corporate mergers and acquisitions are complicated affairs. You’ll need to involve the legal teams of all involved parties and their accountants. We’d also advise tapping into the expertise of an investment bank to ensure everything goes smoothly.

In the case of the former, however, you can actually make intelligent decisions - and purchases - simply by using the right asset management platform. That includes generating quotes, negotiating the best rate, and closing out your application. Here’s where Obie comes in.

Part of our powerful Obie Asset Engine, our commercial financing allows you to spend less time navigating the complexities of corporate financing, and more time on your business. With a single click, we can help you get pre-qualified online in a matter of minutes, using the information already contained in your managed asset or business listing.

We’ll also help you find the loan that best matches your financial goals. 

If time is of the essence, we can help you find multiple types of short-term bridge loans. These are perfect if your business needs to take advantage of a short-term opportunity such as a foreclosure, an unusually-low listing price, or a property for which there is a great deal of competition. It can also help you secure financing if your liquid capital is tied up elsewhere.

For more measured, planned purchases, we can help you seek out term loans. Paid out over a longer period of time, these are great for businesses looking to expand their footprint with new offices or properties. Just remember that the longer your financing period, the more you’ll be paying back in interest. 

We also support both recourse and non-recourse loans wherever relevant. If you’re not certain what that means, recourse loans allow a lender to liquidate other assets if the asset purchased with the loan passes out of the borrower’s ownership. Non-recourse loans, meanwhile, apply exclusively to a purchased asset - the lender cannot liquidate other assets or tap into other finances if the asset becomes unavailable. 

We currently cover the following loan types: 

  • Senior (Term & Bridge, Recourse & Non-Recourse).  So-named because it supersedes other loans, a senior loan allows the provisioning institution to make a legal claim to the borrower’s assets if they default or declare bankruptcy. 
  • Mezzanine(Term & Bridge). Mezzanine loans are typically used as a means of expansion by companies with an existing track record.  They require minimal collateral and cover a shorter period of time than other loans. In exchange, they offer higher rates and give the lender the right to gain an interest in the company in the event of default - this is known as an equity pledge.  
  • Second Lien (Term & Bridge, Recourse & Non-Recourse).  Known also as a junior loan, a second lien loan’s interest rate is higher than that of a senior loan and is often taken out in purchases for which there is insufficient capital from other loan types.  It usually includes an inter-creditor agreement that establishes specific terms for repayment between lending agencies. 
  • Owner-Occupied (Term Only).  If you are purchasing a property you intend to occupy yourself rather than as an investment, an owner-occupied loan is your best bet. These loans are financed based on your business’s revenue and require that 51 percent or more of the property be occupied by your organization. 
  • Construction (Term & Bridge, Recourse & Non-Recourse).  Construction loans are effectively what’s written on the tin - financing meant to cover the construction of a real-estate project that your business is directly involved in.  They are generally considered higher-risk than other types of loans, and as such have much higher interest rates. 

Using our acquisition loan calculator, you can quickly get yourself set up with one of the above financing options.  No need to worry about negotiating a better rate, and no need to concern yourself with the back-and-forth too often involved in the lending process. Simply click to get a quote, enter the real estate details, and we’ll help you take care of the rest.