Best bet is the SBA 7(a) program. SBA requires a minimum borrower injection of 10% of the total project cost. This is not the same as a downpayment but you will still need to invest $50k of your own money or take on a minority parter who can fill the gap. A seasonal bar/restaurant is going to be very tough to get financed on the conventional banking side.
Only having $25k to invest is a very risky propisition. Your mortgage payment is going to be close to $4k w/ taxes and insurance. Also, trade credit is tough to get so you may need to pay all food and drink vendors in cash upfront without having terms.
You will need a detailed business plan to obtain financing and it is always wise to have one anyway. Score.org is a good place to get free advice about running a business for just about any reason. Honestly, you should have access to a minimum of $75 - $100k before jumping into a $500k purchase. You will need liquidity and reserves after closing the purchase. This is almost always required with the SBA programs and always required with conventional programs. Going into a business venture without working capital ready to go is not a good idea.
Talk to family and friends and look for someone to go in with you and provide additional capital.
From what you state, limited hours, limited sales, that business might not be worth $500K.
Options for financing:
1) If you have retirement accounts like IRAs, 401(k)s, SEPs, Keogh, etc - accounts that can be rolled over, you can direct those accounts to invest in your business - be it an established business or to purchase a business/franchise. This is not a loan - so there are no credit checks, no down payments, no interest. Instead of having your funds be invested in other companies, you have them invested in yours.
2) Most banks will probably not fund your deal unless there is real estate involved - enough to qualify the $500K price. An SBA guaranteed loan may help but the bank still has to underwrite it - and you would need real estate and other physical assets valued at least the $500K.
3) Owner financing. This is all negotiation - if you can convince the current owners to take a small down payment (say 10%) - they get them to financing the rest at a decent interest rate for 25 years - with a 5 year balloon. Thus, in five years, you should be able to qualify for your own bank or SBA loan if the business is doing as good as you hope. To get the 10% - there are several personal/business loan options you could pursue like unsecured business loans, peer-to-peer loans or micro loans.
You can find more information about all of these on our website.
Try purchasing just the business and leasing he property from the current owners instead. This should reduce the cost of the project and get you closer to the amount of money down that you need. It will also create an annuity stream of income for the sellers. You could look to put an option to buy on the property for a later date - if the business is successful, you should generate enough funds to purchase the property; if it is not successful, you do not have to buy the real estate - and spend the extra money on it.
You should consider working with a professional business broker who could offer many offer ways to structure a win-win deal and help get it done for you.
Best of luck,
I would suggest that you try to find private investors that would be willing to become part of your team.
How do people find these private investors? How does a person locate strangers who would want to invest? My situation is no connections and no family/friends with enough money to invest in anything. When I picture someone who can talk stangers into investing, I see a gregarious salesperson who could sell ice to an eskimo. That is not me.
Welcome, As I have said many times in the past, the BEST suggestion is SCORE
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I have been looking to purchase a bar to operate as a beach bar in the summer and as a regular bar with scaled back hours in the off season. I have found a place for sale, however it was run by an old couple who have primarily been selling hotdogs and hamburgers and beach supplies only. It's a very casual place that could be re-energized into an unbelievable beach bar. They have a seasonal beer and wine license but haven't pushed alcohol sales too much. Due to their age, they haven't held long hours recently either and that has affected the net sales at the place which won't help me with financing. I know the location and know I can make a killing there with extended hours and a harder push on the alcohol sales and hopefully the obtaining of a year round full liquor license. The place is going to go for about $500K for the business and real estate and I only have about $25K to invest. My understanding is that a bank would only lend me 80-90% max which leaves me very short. Is there another way to get money to fill that gap? Could owner financing fill that gap? Any help or recommended lenders/investors would be appreciated.