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    2 Replies Latest reply on Apr 3, 2010 1:16 PM by Uncle Leon

    Looking for advice on a new business Purchase......

    breezeby Newbie

      Well I am looking at purchasing a pretty new business and they have only been open for about a month and a half. They already have pretty good sales but what Im asking is what will i need to do to get the funding from a bank?

      any help will be appreciated
        • Re: Looking for advice on a new business Purchase......
          Tracker

          breezeby:

           


          Here are some of the basics you will need to help secure a loan from a bank:

           


          A business plan.

           

          Even though the business is already up and running, the bank may want to see what your plans are for investing in and building the business if you were to buy it. Your business plan will describe (amongst other things) your vision for the business, your knowledge about the market, how you plan on beating the completion, and what experience you have for achieving your goals.

           


          Clean personal credit with good credit scores.

           

          They will want to see that you know how to manage your money and repay loans. Each lending institution may ask for different variables on your report, but you should target having debt of less than 30% of your total available credit and scores of 700+.

           


          Some liquid finances of your own.

           

          The bank will want to see you come in with some money of your own to purchase the business. This amount will vary depending on other factors. They will want to know you have "skin in the game", meaning you are more likely to see the business through troubled times instead of bailing out if it doesn't work. Plus, they want to know that if the business falls short of your profit projections, you have other means for paying your bills.

           


          Insurance.

           

          You will need to have you, your personal assets and the business covered by insurance.

           


          Financials from the current business.

           

          They will want to see the books from the current owners to see their sales, profits, expenditures and cashflow to see if the numbers are sustainable and work within your business plan.

           


          The reality is most banks are still very tight on lending. They in essence want to see you are an overwhelmingly sure bet before giving you money.

           


          I hope this helps for a start.

           


          All the Best,

           


          Doug Dolan

           

          The Solopreneur's Guide

           

          http://thesologuide.com/
          • Re: Looking for advice on a new business Purchase......
            Uncle Leon Tracker
            ....what Im asking is what will i need to do to get the funding from a bank? ....

            A miracle. Or significant "readily negotiable collateral" (Real estate, vehicles, etc.)

            A month and a half is no history whatever.

            Banks have not been excited to lend money to small businesses at all for the last two years.

            Even in the best of times, most banks have required two tax returns on which to base their judgements.

            Also, I would question (doubt) any reason given for selling a new business after a month and a half. He may have "figures" to show that the business is doing well. - And "figures don't lie"...but "Liars figure".

            If the seller is so confident about the future of the business, let him carry the paper on it.

            I suggest (if you can get the funds plus operational funds) offering him 25% down, and be happy to get a counter offer of 1/3 down. If he won't accept 1/2 down; find another business to buy.

            If you REALLY want him to show his confidence in the business, offer a down payment and an "earn-out" for the balance. If the business does well, he'll receive a higher price. If it does poorly, he'll receive a lower price.