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Any advice as to where to get a loan to buy an existing business. A friend is selling a business for 95K. I have already had the books looked at and everything is good. I don't have any money to put down. Housing prices in my area (CA) are dropping a little. I have a real estate loan officer looking at a loan against my house, but he isn't sounding too optimistic. I will be running the business, will net me 80K a year, and my husband will keep his job (65K) a year. We can live off of the business income and my husband's income can pay off the loan... in 2 years. If I can come up with 50k down, my friend will finance the rest. I know he wants to sell and retire, so that is my last resort. I would still need the 50K down. Any suggestions?
Money is tight right now (as you know) and selling a business will not be easy for your friend. If you can't get a loan I would suggest to your friend that he finance the whole deal and you will repay him at an advanced rate such as 100 percent in two years.
If you can't get a loan I would suggest to your friend that he finance the whole deal and you will repay him at an advanced rate such as 100 percent in two years.
If you can't get a loan, you shouldn't be buying a business. And definitely don't go the loanshark route! Because 100% in two years is something loan sharks would ask.
If you can't get a loan, you shouldn't be buying a business. And definitely don't go the loanshark route! Because 100% in two years is something loan sharks would ask.
Yep. The number one cause of new business failure (Aside from outright owner stupidity) is not being sufficiently capitalized.
That was the problem in the housing crisis. People were getting interest-only loans and ARMs to squeeze into a house they couldn't otherwise afford. Same thing with business. If you can't scrape together the funds to run the business for months without making your monthly nut using worst-case projections, then save your money and your sanity.
To be sure, there are people who have pulled it off. But for every heart-warming story like that, there are hundreds who wound up going under.
If you can't get a loan, you shouldn't be buying a business.
I completely disagree with this on numerous counts. Just because someone cant get a loan, this doesnt mean they shouldnt be buying a business. We recently sold a business in PA and the buyer couldnt get a loan, but we sold it to him anyways, taking payments for the next 20 years for various reasons. The main reason was we wanted out. He came to us with a sound business plan, he had 5 other similar businesses, and he came vastly qualified. Now you might consider us holding paper for him as a "loan", because technically it is, but he clearly didnt obtain one from an outside source.
On the same count, I'm buying up a steel company in Texas and I cant get a loan to finance the deal, so we have the seller going to the bank borrowing the money, and then I'm going to take over ownership of the corporation under a LBO. Truth be told I cant tell the difference between steel or iron, but the fundamentals are sound, its got a 60+ year history of being in business, over 100 employees, and a well established management team in place.
If you let inability to obtain a loan stop you, especially in this economy, you are losing out on a ton of opportunity.
If you let inability to obtain a loan stop you, especially in this economy, you are losing out on a ton of opportunity.
I think they said this right before the financial crisis happened too. People borrowing money for things they cannot afford because they "don't want to lose an opportunity" to cash in on the then white-hot real estate market.
It sounds fine and dandy for you - the guy brokering the deal and making money - but what about the poor ******* who is stuck with the business, paying 100% on the loan with no guarantees on whether the business may or may not turn around?
I think they said this right before the financial crisis happened too. People borrowing money for things they cannot afford because they "don't want to lose an opportunity" to cash in on the then white-hot real estate market.
It sounds fine and dandy for you - the guy brokering the deal and making money - but what about the poor ******* who is stuck with the business, paying 100% on the loan with no guarantees on whether the business may or may not turn around?
If you want a guarantee in life, stay home living with your parents
If you want a guarantee in life, stay home living with your parents
I'm perfectly happy doing so because I'm not paying rent and my parents have a home that's not foreclosed on because they didn't get into debt with a home they couldn't afford.
I completely disagree with this on numerous counts. Just because someone cant get a loan, this doesnt mean they shouldnt be buying a business. We recently sold a business in PA and the buyer couldnt get a loan, but we sold it to him anyways, taking payments for the next 20 years for various reasons. The main reason was we wanted out. He came to us with a sound business plan, he had 5 other similar businesses, and he came vastly qualified. Now you might consider us holding paper for him as a "loan", because technically it is, but he clearly didnt obtain one from an outside source.
On the same count, I'm buying up a steel company in Texas and I cant get a loan to finance the deal, so we have the seller going to the bank borrowing the money, and then I'm going to take over ownership of the corporation under a LBO. Truth be told I cant tell the difference between steel or iron, but the fundamentals are sound, its got a 60+ year history of being in business, over 100 employees, and a well established management team in place.
If you let inability to obtain a loan stop you, especially in this economy, you are losing out on a ton of opportunity.
Agree with this.... If you have a good business opportunity, don't let inability to get a loan stop you. There are often other creative financing options out there that make financial sense as you have shown. Obtaining commercial loans/line of credits are not the same as obtaining a primary home mortgage. Not sure why people think they are synonymous. Business credit and leverage are used (and often necessary) to build and grow successful businesses which generate profits. This is far different from overpaying for a depreciating primary residence which makes no income.
One of my biggest competitors just approached me for a buyout as the owners want to retire and have no succession plan. The business is overpriced and I won't finance with a bank loan, so we are also investigating alternate financing options now.
I am NY resident but intending to buy a running business in FL. Should I apply for loan in NY or in FL or it does not matter.
Thanks.
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