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    5 Replies Latest reply on Mar 15, 2010 12:06 AM by Uncle Leon

    buying an established business

    matt10486 Wayfarer
      Question for anyone willing to answer, I am thinking of buying a business, only problem is that I don't know if banks would give me a small business loan due to the way the economy is right now. Anyone know what I can do to better my chances?

      Thank you
        • Re: buying an established business



          Some of the basics that you need to take into consideration:


          Create a formal business plan. If you need help creating a business plan, the following is a link to a page to help you:



          You want to make sure your plan includes objective, third-party, verifiable data.


          Make sure your personal credit is clean. Get a copy of your credit report with scores from the three primary agencies - TransUnion, Equifax and Experian. Make sure your scores are good (typically 700 +).


          Have a descent percentage of personal equity. This amount will vary based upon other conditions, but it is likely that a lending institution will require that you come in with money of your own to buy the business, plus have finances to cover your monthly personal finances until your business can pay you back.


          For more information, I recommend you seek out a community member that goes by the nickname "phanio". He will give you some great info.


          I hope this helps.


          Doug Dolan


          The Solopreneur's Guide


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          • Re: buying an established business
            Vilnius Industries Tracker
            it's all about the buisness plane and the exacution of it, it must be flexable and ever-evolving
            • Re: buying an established business
              Uncle Leon Tracker
              The best aay to borrow money to buy an established business is with an SBA guaranteed loan. Without that, you will find it very difficult to bortrow money to buy a business (unless, of course, you have readily negotiable collateral in addition to the business assets).

              With an SBA guaranted loan, you will need to provide 15-20% of the funds; and the seller normally will need to carry 10-15% of the financing in second position. In addition, the business books and tax returns (two years minimum....more is better) must show an adjusted cash flow about 20% higher than is required to operate the business, pay the buyer a reasonable salary, and pay the debt service.

              When a business broker acts as an intermediary for such a business, he will normally have arranged for SBA Pre-Approval for the sale of that business. This is not NECESSARY to get an SBA loan. It just makes it more routine.

     other thing. If there are special skills or knowledge required to opeerate the business, the buyer will normally be required to satisfy the SBA that he has those skills.

              Here's some GOOD news: Even though you are buying an established business; SBA realizes that there are expenses required iby a new owner in taking over and operating a business. Therefore, the borrower may incorporate those anticipated expenses into the SBA loan.