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    7 Replies Latest reply on Dec 12, 2011 1:13 PM by Moderator_JoleK

    Veteran wants to purchase my business

    espresso911 Wayfarer

      I run a small profitable drive thru coffee shop in Tahlequah, OK and I am trying to sell my business.  A local Iraq War veteran would like to take advantage of a SBA loan to purchse my buinsess for 70,000 but Arvest (an Oklahoma Banks run by the Walmart family) would not even process the application because the busineess does not have enough colateral to cover the loan request.  I do not own the real estate that the business occupies but do own the building and equipment and have a positive cash flow. The vertan also owns a current profitable business and if the SBA gurantees 85% of the loan we do not understand why the bank would refuse to even submit the application.  His credit was not the issue, but it is because it is not tied to real estate. 

       

      I have a positive cash flow of about $36,000 per year.  They will not consier the building as real estate but as equipment.  Another local bank said they would consider looking at the 20'x10' building as real estate because it is a permenant building on the property that I lease.  Are we not understanding the SBA loan process?

       

      We have visited several banks and all the loan officers we have spoken with were not even familiar with SBA loans. 

       

      Thank you,

       

      Al

        • Re: Veteran wants to purchase my business
          chris1985 Tracker

          Hello, I work in the SBA department of our bank in MN. We are a SBA national preferred lender, and we do a lot of SBA loans. The real estate issue might not be the problem, it wouldn't be for us. The problem that we have been running into a lot is that the borrower can't put 10%-20% down and they don't have any business assets. There are some other ways around that too, like in some cases the seller has been willing to partially finance some of the purchase price. So in your case for example we might try and do a SBA 7(a) loan and borrow 55k, borrower puts 5k down, and you would figure out a payment plan for him to pay the other 10 k back over the course of 18-24 months. Hope this helps a little. If I read everything right, I don't think the 504 loan would be for you with no real estate.

            • Re: Veteran wants to purchase my business
              espresso911 Wayfarer

              The borrower in my case is/was willing to put down $10,000.  Are you able to a do such a loan in another state?  Another bank here locally (Banc First) said they would consider the building as a real estate improvement upon the exisitng property because it is a permanent building with a seperate address.  But it is also possible to do what you suggest as well.

               

              Al

                • Re: Veteran wants to purchase my business
                  Bridge Navigator

                  It sounds like your local bank is trying to fit a square peg into a round hole.  I am a business broker and run into this all the time - banks that say they do SBA loans but are really looking for real estate backed loans.  Chris is right, you probably want to focus on a SBA 7(A) loan program.

                   

                  Many banks can lend out of state. I would encourage you to call Chris first.  I have also referred many people to Diamond Financial (www.easysba.com) who can assist you in SBA financing.  * I have NO relation to either company.

                   

                  Best of luck.

                  Greg

                  • Re: Veteran wants to purchase my business
                    chris1985 Tracker

                    We do SBA loans all over the country, (lower 48 states) and it sounds like yours would be a good deal, unfortunately we normally don't do anything nationally under 100k. If it was a local deal here in MN we would be more likely to help for smaller loan amounts. I'm guessing that a local bank would want to help you guys out with an SBA loan. They can be 85% guaranteed by the SBA so if they put %10-%15 down with a good credit score I don't see why that would be a problem.

                • Re: Veteran wants to purchase my business
                  phanio Pioneer

                  I am going to start off by saying that I do not know your personal situation - but, why not finance it yourself - as an owner seller?  It might be better for you tax wise - having interest income over the next few years as well as not taking a large hit all at one time.

                   

                  Think about this - the veteran puts down the $10K - that goes in your pocket.  You finance the rest say for 5 years at 10% with a two year balloon payment.

                  This give the veteran time to establish the business in his name for 2 years - when the balloon in due - then, he can get his sba loan to take out the rest - would be around $40K.  Plus, this would put his payment at about $1,200 per month - or about $15,000 per year - still leaving him some profit to keep him motivated in the business.

                  You get to sell your business plus earn an additional $10,000 in interest over the next two years - this is above and beyond the price of selling your business.

                  Sounds like a win-win - but, as stated I don't know your personal situation.

                   

                  Just my thoughts

                   

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