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    10 Replies Latest reply on Jun 18, 2012 5:15 PM by Uncle Leon

    Looking to purchase my first business.

    jnach02 Wayfarer

      I have an opportunity to purchase a Sports Bar in our home town. I have written a business plan and have given it to a couple of famliy members to look over.  Both have extensive knowledge of the business world and they both think I have written a good plan.  My next step is to start looking for financing.  The problem I am going to have is that a bar usually keeps two sets of books and it appears like the bar isn't generating that much revenue when in fact it is making a lot of money.  I went to my bank but they passed based on the revenue reported by the bar and on my personal financial situation. So now I am looking for sources of other financing.  I have done the internet search route, but haven't been able to come up with any real solutions.  I just keep getting transfered from one site to the next. Any help on finding a source of financing would be very helpful.

      Thanks,

      Jeff

        • Re: Looking to purchase my first business.
          myDealCompass Scout

          Would it make sense to look for a business partner as you have already written the business plan? I think it is quite common to bring in someone who has money but not the time to be the "day-to-day" person. You might even syndicate the deal with a number of "high net worth individuals". Do you have a local angel investment community? This would obviously require some share of the business and might not be the type of arrangement you are seeking.  Also remember that business partnerships are like marriages except it is harder to get divorced!

           

          Small business ownership is a wonderful thing and I am excited to hear you are thinking of jumping in!

          • Re: Looking to purchase my first business.
            LUCKIEST Guide

            Sports bars are a great business. If you are planning to purchase this existing business, I would suggest that you talk

            to the present bank that the Sports Bar is using NOW.

            The present owners of the bar have a relationship with their bank. The bank knows how the Sports Bar operates

            and finally their bank might want to keep you as their customer.

             

            Good luck, Happy New Year

             

            LUCKIEST

            • Re: Looking to purchase my first business.
              jwmann2 Wayfarer

              FromThisSeat.com

              Are you implying that the bar is genearting a lot of cash and not claiming it? Thus you are convinced that it is more profitable than what is on paper?

              Not sure the real estate you are looking at but I have heard that this is a tough niche to survive in especially if your town has the big boys like a Hooters, Buffalo Wild Wings or Trumps.

              Not saying it couldn't work. A lot of the people I have seen do well in the bar industry are those that are there day to day and working. They take their tips and put it back into the bar. A partnership rarely works especially in the restuarant industry. Too many decisions to be made which means more room for tension. I wouldn't go that route as long as you have the capital.

                • Re: Looking to purchase my first business.
                  jnach02 Wayfarer

                  That is one of the main hurdles I am trying to overcome.  The bar looks like it only generates a small profit, but in fact it is doing really good.  We live in a very small town and I know the owners and they have shared the #'s with me.  The deal includes the building and all the fixtures, so we will be up and running in just a few days.  It also includes two apartments on the second floor and a basement that needs to be updated to rent out as a banquet/party room.  Something the old owners never wanted to get into, but there currently isn't one in our town, so I know it would go over well.  There isn't a franchise within 40 miles of our town, so not to worried about that.  I have looked at Angel Investors and not to many choices locally. I know, I need to look beyond that.  The loan amount I'm looking for is way below the minimum most want to invest.  It is easier to get a million dollars these days than it is to get one hundred thousand. lol  Thanks for the input.

                • Re: Looking to purchase my first business.
                  Bridge Navigator

                  Jeff,

                   

                  Beware of the Seller who says I'm lying to the IRS but trust me, I'm telling you the truth - the business really is making money.

                   

                  In this case, Seller financing is your best option.  The Seller should be willing to finance a substantial portion of the ransaction to back-up the "second" set of books. 

                   

                  As a side note, "Angel Investors"  generally do not look at bars and restaurants.  This type of business generall falls into the three Fs financing group: Friends, Family, and Fools.

                   

                  Best of luck,

                   

                  Greg

                  • Re: Looking to purchase my first business.
                    Navigator

                    Why doesn't it seem to be throwing up any red flags for you that the people you are hoping to do business with obviously do business illegally? I'm not a lawyer or a tax expert, however, I'm fairly certain that if the IRS finds out post sale the current owners are using creative accounting to cook the books, you would gain the tax liability for any uncollected taxes right along with the rest of the business.


                     

                    Underreporting profits and overstating losses in order to reduce tax liability is a crime. Auditors are trained to look for signs of tax fraud, which is a form of tax evasion. Keeping two sets of financial books, making deductions or allowances for things you didn't actually purchase or claiming dependents when you are single and childless are just a few examples of tax fraud. If you are caught during an audit, the auditor can either penalize you with fines or refer your case to the IRS’s Criminal Investigation Division (CID).


                     

                    This may seem like a great deal too good to walk away from but my personal advice would be to walk away. If it seems too good to be true, it most likely is and hindsight may be 20/20 but good foresight can save you a lot of headaches.


                     

                    Best of luck!

                    ~Moni

                      • Re: Looking to purchase my first business.
                        CC101 Adventurer

                        Have you taken a look at grants.gov? If the banks don't want to work with you there is money to be had in terms of a government grant for small businesses. We've also had good success using the resources at businessformationgroup.org

                         

                        Good luck!

                        • Re: Looking to purchase my first business.
                          Uncle Leon Tracker

                          I agree with you Monie.

                          -

                          Keeping two sets of books is an excellent way to get the government to pay for your room and board for several years.  Unfortunately, the accomodations are very small and far from luxurious.

                          -

                          I realize that some "cash" businesses (such as laundromats, etc.) do not account for all their receipts.

                          -

                          When I was in business in a resort area, I had many customers that owned small "momma-poppa" type motels, or restaruants.  They often paid in cash, even for totals over a thousand dollars

                          -

                          Uh-huh....

                           

                          I have to admit being somewhat resentful, at times....feeling that the government wouldn't allow me to make significantly more money.  It seemed that If I earned another 10,000 gross, I could only end up keeping 1500 or so after expenses and T-A-X-E-S.  Nevertheless, I paid them, properly.  I did discover that the business could provide me some benefits that people who are not in business couldn't enjoy.