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    9 Replies Latest reply on May 24, 2008 11:09 PM by kirkley

    Possible to finance a business in full.....no money down?

    MsSofty88 Newbie
      I am looking at purchasing a business for about $85K. I would like to finance the entire purchase. Is this possible for a fair interest rate, no prepayment penalty? How long of a term is allowed for this type of loan. I have excellent credit personally so that isn't an issue. I have not attempted to source the funds in "one loan" yet, but have the opportunity to get the money from 2 sources at 6.99%....one would be for 5 years, they other for 8 years. The disadvantage is that the payments are higher and I would like the payment to be as low as I can to start simply for cash flow purposes.
      Not sure if that is a fair interest rate. Seems like it after all I have read.
      Any advice is GREATLY appreciated.
        • Re: Possible to finance a business in full.....no money down?
          LUCKIEST Guide
          It is great that you have excellent credit and that you can get money from 2 sources.
          I am guessing that the 8 year payout would have a lower monthly payment.
          Do you want to share with us what type of business you are looking at purchasing.
          Do you have a Business and Marketing Plan?? How about an Accountant?? A Lawyer??
          Good luck, LUCKIEST
            • Re: Possible to finance a business in full.....no money down?
              MsSofty88 Newbie

              I ended up buying this embroidery business. I counter offered her $60K and she accepted. This is someone I know personally. She is ready to retire and is "tired" of working so hard. She has been at it for 12 years. She does have some medical issues that have added to her decision. She was just going to shut her doors and use her equipment to do odds and ends on EBay. But when she sent the email that she was closing, she noted that if we knew of anyone interested in buying it, to let her know. She didnt expect to get a response and well....that is where I come in. I started inquiring about it, took a look at her income statement and started number crunching to the best of my ability. After all her expenses which is mainly COGS for apparel and basic expenses (telephone, insurance etc), her NET was about $30K. She doesn't have any liabilites to speak of. $15K of the asking price was equipment and probably $10K in apparel, thread, FF&E etc. She has never advertised and has herself buried with work. Well....to her standards "buried"....I am young and eager and willing to work longer hours....I do it now for someone else! At any rate, I offered her $60 (down from $85), she accepted and so goes my quest for funds. She wanted $20K down. I could've cashed in one of my retirement plans, but I don't want to do that if I can help it. I know that I will be paying higher interest on an unsecured loan, but I figure my return on my retirement funds if left alone will yield WAY more in the long run than I will ever pay out in interest.
              Well I secured the $20K, but it wasn't at 6.99%....it was at 9.99%. We have great credit, but we also have alot of money available to us on revolving credit and that has hurt us. I think that is sad....since we don't have debt, but apparently people WANTING you to use their money can be detrimental to a lender. So I have $40K more to come up with. I intend to reinvest my earnings and work to get the loans paid off asap.
              But the other option that has been given to me is that she will sell it to me on contract. $20K down, the rest paid off in 6 years at 5% interest. I feel like this is an excellent deal. I will have my lawyer draw up the contract so there isnt any question down the road. I do have an accountant, but until I take possession, I haven't sat down with him. I am in process with a business plan, but that is a new concept to me....
              Just curious about thoughts on my interest rates. I have looked around at unsecured loans and they range anywhere from 7.5 to 21% depending on many factors. I didn't think I did that bad, but would like another opinion.
              Even if it takes me 6 years to pay both back, my business will be paid for with the exception of COGS and fixed expenses. I would like to grow it a little after I get in and get comfortable, but I am not looking to turn this into big corporate america. I love small business in small communities at a fair price. I just want to work for myself and live comfortably.

              Any thoughts on a loan for this business?

            • Re: Possible to finance a business in full.....no money down?
              Lucky7 Newbie

              I'd do more research before you jump in. Who are her long term customers. How much repeat business do they request each year? How many new customers did she bring in over the years she's had the business. It can be done but it's a tough world out there.

              Have you ever run your own business before? It takes a lot of discipline. You have to be able to depend on you. Do you have savings set aside to pull you through tough times?

              That's why a lot of people are looking toward network marketing companies. Aside from the companies everyone has heard of before, there are a lot of corporations crossing over into network marketing because of the benefits, low startup, the sales force is paid as they earn money for the company, etc.

              The best advice I can give is to speak with someone at S.C.O.R.E. and the smalll business administation. They give advice to startup companies. So does my program.

               


              Laura

               

              (570) 417-9442
              • Re: Possible to finance a business in full.....no money down?
                MDF2008 Wayfarer
                +What kind of ROI are looking for?+</stro<br />Do you have a business plan?*
                • Re: Possible to finance a business in full.....no money down?
                  TJMorehead Adventurer
                  Ms. Softy 88,

                  There are a couple of things that I'd like to consider. However, if you still need assistance, please reference my company's services.

                   

                  One of the programs we offer, is called the CommunityExpress Loan especially designed for start-ups and emerging companies. There is no business plan required; no personal financial statements requested; not tax returns needed; no collateral required; no early payment penalties; no complex paper work; and no high interest rate. You only need a DBA (doing business as) certificate and a business checking account established in the name of the business.

                  Other funding programs available are:

                  Government Small Business Loans up to $2,000,000
                  Equipment Lease Financing
                  Contract Financing
                  Factory Financing
                  Revolving Lines of Credit
                  Merchant Card Processing Services
                  Merchant Card Express Cash Advances
                  Business Credit Building Program (a 7 month program)
                  Credit Restoration Services

                  I'll be happy to facilitate the appropriate funding program for you. My email is moreheadsconnections@gmail.com

                  Warm regards,
                  TJ Morehead
                  • Re: Possible to finance a business in full.....no money down?
                    Tracker
                    Here is an excerpt from one of my posts "How to buy a good business without using your own money - Part 2 - How This Works" that might be help you with some ideas (for part 1, see my 5/22 post "How to buy a good business without using your own money"):

                     

                    How This Works

                     


                    An Overview:

                     


                    In its simplest explanation, leveraged buyouts use the balance sheet of the business to create the cash and you use the income statement to pay for the cash that is used to acquire the business.

                     


                    Let me walk you through an overview of an actual transaction (on this one I'll round the numbers to make it simpler to follow).

                     


                    One of my funding sources sends out a monthly newsletter and recently sent a little news item on providing funding for the $300,000.00 purchase of a small manufacturing business.

                     


                    Here is a financial summary of the business the buyer wanted to buy:

                     


                    From their Balance Sheet -

                    • The business had $100,000 in accounts receivable.

                    • The business had about $200,000 in equipment.

                    • The business real estate was worth about $225,000.

                    Here is how those assets were used to come up with the purchase price to buy the business:

                     


                    The buyer was able to use those assets in this way -

                     

                    • The buyer sold the accounts receivable to a firm that buys receivables for $85,000.

                    • A funding source was able to lend the buyer $100,000.00 against the value of the equipment

                    • The funding source was able to lend the buyer $135,000.00 against the value of the real estate.

                    The total amount the funding source was able to provide the buyer was $320,000.

                     


                    The purchase price was $300,000 and the buyer allocated the surplus $20,000 to be used for additional working capital for the business.

                     


                    The buyer did not have to put any of their own money into the deal.