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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?
If you can net $80K/year then you can pay off the down payment while making the finance payments on the rest. You'd have it paid for in just over a year. Why not just do that?
Thanks and I understand. I wanted to connect with you in that regard as I do not have my lawyer. Will also try sending a PM once the system allows tomorrow.
Quote:
Originally Posted by Wendell Phillips
Those are all questions that you need to ask your lawyer. I am not allowed to give you legal advice; I have only pointed out the relevant facts that should put you on your guard.
I am in the almost exact situation except I dont own a home.
However I do have 20k and own a couple of decent vehicles worth 10k If that helps.
Bankruptcy in 2012
I agree 100%. Buying a business for $95k when it "nets" $80k is highly suspect. It's usually not that high. Even most franchises that sell for $150-200k don't net more than $40-50k. But that's just my experience. You should look at the number much more closely before committing because if you're borrowing against your house and getting into more debt and you find that it nets A LOT less than what you expected, then you won't be able to make your loan payments. Just something to think about.
I suspect this business is mostly "good will".....not a high amount of assets hence the skewed valuation.
No one sells a business for 1.11 times annual profit
I disagree.....You can sell a business for whatever a buyer is willing to pay. The valuation is based on many things, annual profit is just one. Assets, inventory, raw materials are all part of the equation as well.
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.
Great post!
Plenty of businesses are based on good will (law firms, medical practices, many service businesses)....they all have regular clients yet don't have a single contract in place. No one is forcing you to go to the same dentist for 20 years, the same dry cleaner etc.....people tend to be creatures of habit so when they become repeat customers then that represents value to the buyer but no necessarily value to a bank! They need tangible assets to sell if the business fails, tough to sell the customers of a closed business.
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