Entrepreneurship Through Acquisition: What This Trend Means for Financing

The entrepreneurial landscape is evolving. While the traditional path of starting a business from the ground up remains viable, an increasing number of aspiring business owners are opting for entrepreneurship through acquisition (ETA)—a strategy that involves purchasing an existing business rather than building one from scratch. This shift is creating new financing needs and opportunities, particularly for lenders specializing in small business loans.

Why ETA is Gaining Momentum

Several factors are driving the growth of entrepreneurship through acquisition:

• Lower Risk Profile – Unlike startups, acquired businesses often have established revenue streams, customer bases, and operational frameworks, reducing the risks associated with new ventures.
• Baby Boomer Business Transitions – Many small business owners from the baby boomer generation are looking to retire, creating a wave of acquisition opportunities.
• Increased Access to Capital – SBA loans and alternative financing solutions are making it easier for buyers to fund acquisitions.
• Strong ROI Potential – Buyers can leverage an existing business’s track record to generate returns more quickly than they would with a startup.

The Role of SBA Lending in ETA

For many acquisition entrepreneurs, SBA 7(a) loans are an attractive financing option. These loans offer competitive terms, lower down payments, and longer repayment periods, making them well-suited for business acquisitions.

At Bankwell, we’ve seen a growing interest in SBA financing for ETA, with borrowers seeking flexible solutions to acquire businesses across various industries, from healthcare to manufacturing and professional services. Understanding the nuances of structuring these deals—such as seller financing, working capital needs, and business valuation—is essential for both lenders and buyers.

Beyond the favorable terms, SBA loans provide crucial support in financing acquisitions that may not qualify for traditional lending. Many businesses being acquired have significant intangible assets, such as brand reputation and customer loyalty, which can make conventional financing more challenging. SBA 7(a) loans help bridge this gap by allowing borrowers to finance goodwill and other intangible assets that are critical to business success.

Additionally, these loans offer flexibility in structuring deals. Buyers can combine SBA financing with seller financing, which can reduce the amount of equity they need to inject upfront. This makes it easier for entrepreneurs to acquire businesses without depleting their personal savings. Moreover, lenders like Bankwell work closely with borrowers to ensure their financing package aligns with their long-term growth and operational goals, setting them up for success beyond the initial acquisition.

One way we do this at Bankwell is to work with clients to empower business principles with education up front. We want our borrowers to know all of the finance options available, to know how best to prepare for a loan application, and to be able to plan effectively to service the debt through business operations.

Key Considerations for Prospective Buyers

If you’re considering entrepreneurship through acquisition, keep these factors in mind:

1. Due Diligence is Critical – A thorough review of financials, operations, and customer retention can help ensure you’re making a sound investment.
2. Financing Strategy Matters – Understanding your financing options, including SBA loans and alternative lenders, can help you secure favorable terms.
3. Operational Transition is Key – Acquiring a business means stepping into an existing culture and process; having a strong transition plan is crucial.

Looking Ahead

Entrepreneurship through acquisition isn’t just a trend—it’s a long-term shift in how business ownership is evolving. For lenders, it presents an opportunity to support a new wave of business owners who are ready to build upon existing success. At Bankwell, we are committed to providing the financing solutions that make these acquisitions possible, ensuring that both buyers and businesses thrive.

If you’re exploring business acquisition and need guidance on financing options, let’s connect!