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    1 Reply Latest reply on Mar 5, 2009 8:22 AM by bmt2008

    looking for a small business loan

    mtd111 Newbie

      First: Thanks for taking the time to read this.

      I'm interested in purchasing a business.
      My credit is good but not perfect. Hovering around 700. One agency is reporting just over 700 and the other two are just under.

      Unfortunately, I am woefully out of my element when it comes to the ins and outs of business finance. I understand a PNL and controlling COGs extremely well and can get money to the bottom line, but I don't understand the best way to secure funds.

      I'm grateful for any advice.
      I'm looking at two scenarios. Both are existing businesses with strong track records:

      The first is a business selling for 400k. The owner is willing to finance 350k as long as I can bring 50k to the table. I'd like to borrow between 50 and 100k. Enough to get into the business and make sure I have an adequate cash reserve.

      The second scenario would require me to borrow 400k for the purchase of a rest/bar. I know this business extremely well ( 14 years experience in the business ) and I'm currently the general manager of a competing rest/bar with just over 2mil in annual sales. I know the market and have enormous amounts of goodwill in the community. However I have questions regarding my ability to borrow 400k without 20% to throw down. Are business deals ever set up ( dare i say it? ) like a mortgage. For example a 20% loan that allows you to borrow the 80%. Or are you wiping away tears of laughter as you read this?!

      Thank you in advance for your time.
        • Re: looking for a small business loan
          bmt2008 Adventurer
          Yes, to both scenarios.

          Lots of lenders - non-bank and bank lenders - love to see owner financing as long as the business being purchased is profitable and can demonstrate this with financials and tax returns. There are also lenders that provide unsecured personal loans for the amount you are seeking as long as your credit is strong and you can demonstrate an ability to service the payments.

          80% LTV is usually the maximum (like a mortgage) that lenders will lend but this also depends on how strong the business and the borrower. However, if you have to borrow the 20% - some lenders will look negatively on this as your overall debt-to-income ratios will be impacted. Just keep in mind, the more you can come up with for a down payment - the better your chances of securing financing for the rest.

          Do you have any personal equity that could be used? This would greatly help your chances? Or, might think about borrowing the down payment from friends and family - something that would not be on your credit report or find a limited partner that will provide the down payment in return for a percentage of profits until the amount is paid back.

          Just some thoughts
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