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    5 Replies Latest reply on Aug 25, 2010 9:09 AM by ArcSine

    Buying  business and brokers

    Brian65 Newbie
      I am looking to buy a turnkey business. The owner wants $50,000 down. I spoke with a broker who basicly told me I will never buy a business unless I have a considerable amount of money or large collaterol. I have neither. The owner has been in business a long time and although he is not a franchise his name is everywhere on business's. He offers the use of his name as proven success. I am very interest but how will I ever come up with the resources the brokers says I need. I do not have 50K nor do I have collateral. I have worked in an unrelated business for 18 years and my company is selling to an investor and I want to get out.

      How can I do this with no money and not use a Broker who wont even talk unless I have $$$$$$$$
        • Re: Buying  business and brokers
          EAGALL Newbie
          I think your problem is quite obvious. You want to "buy" something, yet you have no money. Your best option is to find family or friends who believe in you enough to front you the money needed to buy the business.
            • Re: Buying  business and brokers
              Brian65 Newbie
              I do have some money but not enough. Banks won't lend to someone without something to give them. How do people go into business with very little money? I can hand over 10K but that is all.
                • Re: Buying  business and brokers
                  EAGALL Newbie
                  Brian, In today's business world, it takes money to make money. Given you have no track record and you have no collateral, a bank is not going to hand money to you and believe you will return it. You believes in you? That is the question you need to answer. That answer is the source of your money. If nobody believes in you, then you need to work to come up with the cash yourself. The business broker is doing the right thing here. If you don't have enough for the down payment plus some working capital, he's not going to waste his seller's time with you. His seller is busy running a business.

                  My advice is to start your own business part time on the side while you have a job. Grow it until it is bringing in enough money for you to quit your job and devote full time to it.
              • Re: Buying  business and brokers
                Tracker

                Brian65:

                 


                You can look at a few options:

                 


                1. See if you can get a loan from friends and family

                 

                2. Find a partner(s) that can come in with the extra cash

                 

                3. See if the seller is willing to do a seller carry back (where they act as the bank carrying the note on the loan)

                 

                4. Move on to another opportunity

                 


                I obviously don't know the details of the business you want to buy, but sometimes what may seem like a great opportunity turns out to be something other ... either not a good opportunity or just not a good opportunity for you.

                 


                I would be concerned if you went in with all of your cash reserves and then what if the business doesn't perform as expected.

                 


                Best of luck.

                 


                Doug Dolan

                 

                Small Biz Break (http://smallbizbreak.com)

                 

                "Simple, Spontaneous, Success"
                • Re: Buying  business and brokers
                  ArcSine Scout
                  Several excellent points in the foregoing, Brian....in particular I'd direct your attention to Doug's 2nd and 3rd points. #2 is the classic "cash partner, know-how partner" arrangement that's sometimes the answer in situations like yours. You locate a biz that's right up your alley in terms of your experience and expertise. You provide the know-how; your partner / investor provides the acquisition financing; you share the profits. (Depending on the particulars, you might want to negotiate for the right (an option) to buy out the financier-partner down the road, out of your share of the profits.) Also keep in mind that closing cash isn't necessarily the only thing a deep-pocket partner might bring to the table....if he or she has a sufficiently strong balance sheet, that might provide the support for some bank financing.

                  #3 is almost a given in most small-business deals. The small-biz seller expecting an '+all-cash-at-closing+' deal has a surprise coming (and you mentioned the owner of the one you're vetting "wants 50K down..." so it sounds like seller financing is already an expected part of this deal, as well). Keep in mind that the % of the price a seller is willing to take as a note, vs. the % he requires in cash, is partially a function of how secure you can make him feel as to your ability to run the biz profitably (at least while the note's still outstanding). There's frequently a tax advantage to the seller in taking an installment note, so you've got that angle working for you. But if Seller isn't confident in the odds of your being able to run the biz for enough positive cash flow to satisfy the note, he'll want much more of the price up front, tax considerations notwithstanding. So here again, it points to your locating a business in which you have expertise and experience.

                  The answer in your case might come down to a creative combination of both cash-partner, and seller financing. Best of luck!