Business acquisition loans are a great way to grow your wealth and strengthen your business brand by buying another company. Here’s how it usually works:

First, you need to have your own business that’s been running for over two years in a specific industry. Then, you make an offer to buy another business that has been operating for three to five years or more. By doing this, you gain their clients, intellectual property, and database, which helps solidify your place in the market.

For example, if you’re a gardener with a profitable business running for more than two years, you can either spend more on advertising to get new clients or buy another gardening company that’s been around for 10-15 years. The owner might want to retire, so you pay an agreed amount and take over their operations.

The price of these businesses is usually based on their average earnings over the last two years. The value can vary a lot depending on the industry. Tech companies might sell for ten times their earnings, while simpler businesses might sell for just twice their earnings.

When buying a business, consider what you’re getting. Is it just the number of clients? Or are there unique intellectual properties or key people that add value? Sometimes businesses are attractive because they have strong contracts with major companies, giving them a competitive edge.

Some businesses sell for a high price, often much more than their current earnings such as 10X their EBITDA. On the other hand, some businesses sell for a lower price, around 2X their current earnings. The value depends on the industry and other factors, like how strong the business is and any unique assets it has.

This is how business acquisition finance works.