Short answer: Most buyers finance a business purchase with an SBA 7(a) loan, a down payment of around 10% of the project cost, and sometimes a seller note for part of the price. Before closing, you’ll review the seller’s financials, confirm the lease can transfer, and in New Jersey, file a bulk sale notice with the Division of Taxation so you don’t inherit the seller’s unpaid taxes.
Buying a business that already has customers, staff and cash flow can be a faster path to growth than starting from scratch. In Hoboken, that might mean taking over a well-known cafe, a salon with a loyal client list, a gym, a dental practice or a service company whose owner is retiring. It might also mean buying a competitor to grow the business you already own.
This guide covers how acquisition financing works and the steps to close a purchase safely.
We’re NexGen Lending, a business funding company at 22 Hudson Place in Hoboken. NexGen offers acquisition financing and business brokering, so we see these deals from both sides.
Is it better to buy a business or start one?
Short answer: Buying costs more up front but comes with existing revenue, customers and a track record lenders can underwrite. Starting from scratch costs less at first but carries more risk and is harder to finance.
Lenders like acquisitions because they can review years of actual results rather than projections. For a buyer, that history makes financing more available than it would be for a brand-new startup.
How do I finance buying a business?
Short answer: The most common structure is an SBA 7(a) loan for most of the price, the buyer’s own down payment, and sometimes a seller note. Term loans and lines of credit can fill in working capital needs after closing.
- SBA 7(a) loans: The most popular way to buy a small business. Loans go up to $5 million, with repayment terms commonly up to 10 years for a business purchase and longer if real estate is included.
- Seller financing: The seller agrees to be paid part of the price over time. This shows the seller believes in the business and reduces how much you need to borrow.
- Term loans: A faster option for smaller purchases or buyers who don’t fit SBA requirements.
- Business line of credit: Working capital for the first months of ownership, when you’re learning the business.
What is seller financing? Seller financing, also called a seller note, is when the person selling the business lends you part of the purchase price and you repay them over time, usually with interest. It’s common in small business sales and can lower the amount of cash and bank financing you need.
How much down payment do I need to buy a business?
Short answer: For an SBA-financed purchase, plan on at least 10% of the total project cost. Conventional loans often require more.
SBA lenders generally require the buyer to inject at least 10% of the project cost. In some cases, a seller note can count toward part of that if the seller agrees to defer payments for a period. Your exact down payment depends on the lender, the business and your experience in the industry.
What should I check before buying a business in Hoboken?
Short answer: Verify the financials, the lease, licenses, equipment condition, staff and customer concentration, and New Jersey tax obligations before you sign.
Your due diligence list should include:
- Three years of tax returns and financial statements, matched against bank statements. If the seller’s books are messy, that’s a warning sign. See why clean books matter.
- The lease. Can it be assigned to you? How many years remain? What happens to the rent at renewal? In a market with Hoboken’s rents, the lease can make or break the deal.
- Licenses and permits. Make sure they can transfer, or that you can get your own in time. New Jersey limits the number of liquor licenses based on a town’s population, so in a restaurant or bar sale the license can be one of the most valuable assets and needs its own approval process.
- Equipment. Its age, condition and whether it’s owned or leased.
- Employees and key relationships. Will key staff stay? Is the business dependent on the owner personally?
- Customer concentration. If one or two customers drive most of the revenue, that’s a risk.
- Liabilities. Outstanding debts, liens, lawsuits and unpaid taxes.
What is a bulk sale notice in New Jersey?
Short answer: When you buy the business assets of a New Jersey business, you must notify the NJ Division of Taxation at least 10 business days before closing by filing Form C-9600. If you skip it, you can become responsible for the seller’s unpaid state taxes.
After the filing, the Division of Taxation tells you whether to hold back part of the purchase price in escrow to cover the seller’s tax debts. Your attorney will usually handle this, but make sure it’s on the closing checklist.
How to Buy a Business in Hoboken, Step by Step
- Set your criteria. Industry, price range, location and how hands-on you want to be.
- Get pre-qualified. Talk to a lender early so you know your budget before you make offers.
- Find the business. Through brokers, your network, or by approaching owners directly. NexGen’s business brokering service can help.
- Sign a letter of intent. Outline the price, structure and contingencies, including financing.
- Do due diligence. Use the checklist above, with your accountant and attorney.
- Apply for financing. Submit the purchase agreement, the business’s financials and your own financial information.
- File the bulk sale notice. Form C-9600 with the NJ Division of Taxation, at least 10 business days before closing.
- Close and transition. Plan a handover period with the seller to learn customers, vendors and systems.
How NexGen Lending Helps Hoboken Buyers Close
- Acquisition financing and brokering in one place. We can help you find a business and finance it.
- SBA, term loans and lines of credit, from $10,000 to $10,000,000 depending on the program.
- Fast answers. Approvals typically come in 1 to 24 hours, so you can make offers with confidence.
- Partner lenders including OnDeck, Mulligan Funding, Wayflyer and Rapid Finance, available through the same application.
- A local office at 22 Hudson Place, a short walk from the PATH.
If you’re buying a restaurant or bar, our guide to restaurant business loans covers what lenders look for. And whoever you work with, watch for the warning signs in our guide to business funding scams.
Found a business you want to buy? Apply now or call (908) 639-4361 to talk about financing. Funding your Tomorrow, Today.
Frequently Asked Questions
Can I use an SBA loan to buy a business in New Jersey?
Yes. The SBA 7(a) program is one of the most common ways to finance a business purchase, in New Jersey and nationwide. It can cover the purchase price, equipment, working capital and sometimes real estate.
Can I buy a business with no money down?
It’s rare. SBA lenders generally require at least 10% of the project cost from the buyer, though a seller note can sometimes cover part of it. Be cautious with anyone promising a no-money-down deal.
How long does it take to finance a business purchase?
SBA acquisition loans commonly take several weeks to a few months, depending on how quickly documents come in. Smaller purchases financed with term loans can move faster.
Do I need experience in the industry to buy a business?
It helps a lot. Lenders want to see that you can run the business, either through direct industry experience, management experience or a plan to keep key staff and have the seller help with the transition.
What happens if I don’t file a bulk sale notice in New Jersey?
You may become liable for the seller’s unpaid New Jersey state taxes. File Form C-9600 with the Division of Taxation at least 10 business days before closing.
Can NexGen help me buy a competitor to grow my current business?
Yes. Buying a competitor is a common growth strategy, and the same financing options apply. Your current business’s financials can strengthen the application.
This article is for general informational purposes only and is not financial, legal, or tax advice. Loan terms, rates, and eligibility vary by lender and program and are subject to approval. Work with an attorney and accountant on any business purchase.