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    1 Reply Latest reply on Nov 1, 2015 12:51 AM by sanctuary303

    Applying for a business loan - against all odds

    phreedom76 Adventurer

      I apologize ahead of time... I write a lot. Every. Single. Time. I am sorry.

       

      First of all, a brief history. This is to give you an example of why I said "against all odds." I was a fairly rebellious teen which did not sit well with my father who wanted a normal family. At the age of 17 he threw me to the wolves, and that was the last support system I ever had. Naturally, through my early twenties I made some mistakes. Some were personal, some were financial. I struggled with minimum wage jobs, and the one time I received a credit card, I let my ex boyfriend max it out. He promptly quit his job and left me with the bill, and a two year old boy. So be it. Eventually, I smartened up and realized I would never make it in this world on a minimum wage job. I went to school for business, accounting, and office management. I got married. I had a few more children. Things did not work out with my ex husband, and so I am now a single mother of five. I tried and tried to find work that would utilize my education, and pay the bills, but every place I turned my resume into told me, "No. You do not have enough experience." These were secretarial positions mostly. As you can imagine, I felt very discouraged. Meanwhile, I am still making minimum wage, and had no support system. Naturally, despite the fact that I worked hard, I was never able to afford any assets, save any money, repair my credit, or pay my bills on time.

       

      Fast forward a few years.... I finally found a good job. I was hired to manage a motel with 9 apartments and 24 rooms. I was so excited to be able to build up the experience I needed that I took the job immediately. Even if it only paid minimum wage, the hours alone would put me in a higher income bracket. You can only imagine the horror when my boss offered to pay me a salary that was less than minimum wage. I refused the salary and told him the bare minimum I would need to pay my bills, but he refused to budge. I promised myself I would put one year in, to gain experience for my resume, and then I would look for work elsewhere. I was not making enough to pay my bare minimum bills (rent, electric, water, daycare) so I would have to borrow money from my boss to keep my utilities on. I am not fond of borrowing money because my low income, lack of assets, and zero savings meant that borrowing money would be a debt. After years of poverty, debt is fairly terrifying. Whenever I had to borrow money from him, I would pay him back immediately. He was so impressed at the way I managed the motel, and how quickly I paid my debts up, that he offered to sell the business to me. He even offered to co sign on the loan.

       

      So here I am today. I have what feels like the only opportunity that will come my way in this life time. I love my job (not the pay). I am great at my job! He hired me to be a manager, but I also do every-other-thing involved in running a business. I do the accounting, bookkeeping, payroll, advertising, inventory...etc... He stops in for 5 minutes a day to collect the money, and I run everything else. There are no other bosses. I am over six other employees. Not only do I want this motel, but I need this motel. I feel so much drive!!!! However, I still have no assets. I have no savings. No down payment. Poor credit. I need a financial adviser but do not make enough to hire one. I will need investors, but do not know how to go about getting them. I have the paperwork to apply for the loan, but am unsure how to fill it out. I am working on a business plan. My boss keeps pushing me to get a grant for a single mother, but I have been looking and cannot find one. Meanwhile, I am working 50 hours a week and raising five children. There is a limited amount of time I can research everything!

       

      Is there any guidance any one can give me? Where do I start? Where do I look for these grants? Are there any places that offer assistance filling out loan packages? How can I prove that I can handle the business, and pay the bills, and pay back the loan? How can I prove that the only reason I have struggled is because of lack of income and resources, and not because of irresponsibility? I have had two very small personal loans that I have paid off in full, on time, but I struggled with making payments on a regular basis with one of them. I really am lost, and have no one to turn to for advice. My boss is so accustomed to me handling everything that when I ask him questions he just winks at me and says, "you'll figure it out." I think he is as lost as I am, but doesn't want to admit it. That is exactly how I handled this job from day one. "Sure boss, I got it." Then, panic and google when he walks out the door. Seriously though, I am terrified of losing this opportunity. I know the odds are against me. I know that getting approved for the loan is improbable. I also know that it is not impossible, which is plenty good enough of a reason for me to know that, I will own this motel... if I could just get a little advice.

        • Re: Applying for a business loan - against all odds
          LUCKIEST Guide

          Welcome to the community. We who answer questions at the community have

          different backgrounds and different answers to most questions.

          I have a VERY simple suggestion.

          Think outside the box.

          Instead of a loan, talk to the owner and ask him if we will takes notes from you.

          Instead of a bank loan where you have to make payments to the bank, there is

          NO loan, just notes to the owner.

           

          Good luck, LUCKIEST

          • Re: Applying for a business loan - against all odds
            Moderator Rebecca Guide

            Hi phreedom76, welcome to our community!  You have a lot of drive and desire and that will certainly help you in your goal of owning your own motel.  Luckiest has provided a good idea, is it possible that you could arrange a "rent to own" type of agreement with the current owner?  It's certainly something to consider.

             

            Have you developed a good business plan?  You'll definitely need this for any possible investors, as well as a blueprint for you in your journey to ownership.  If you're unsure where to start with writing your business plan, we have a great guide available written by our small business experts  that you will find useful Guide: How to develop a business plan.

             

            Once you've started on that, schedule an appointment with your local SBA (small business association) or S.C.O.R.E chapter. These are free resources available to help you with your goals, and can also point you in the direction of any grants or loans that may be available to you.  The SCORE Association, supported by SBA, is a nonprofit association of thousands of volunteer business counselors throughout the U.S. and its territories.  You can find out more information on these resources at The U.S. Small Business Administration | SBA.gov .

             

            In the meantime, be sure to browse the articles and discussions on our site.  You may find some others who have the same types of questions that you do, or helpful tips and tricks to keep in mind while writing your business plan.  Feel free to ask questions along the way to our community!

             

            I know this is an exciting time for you, and hope that your will find our community and resources an important part of your journey to own you own motel.  I look forward to hearing more about you and your plans soon!

             

            Cheers,

            -Rebecca


            • Re: Applying for a business loan - against all odds
              sanctuary303 Adventurer

              Hello phreedom76!

              It appears that you are looking for a loan to buy freedom and control from the Owner, is that correct? (1) How much loan are you looking for? (2) Since you are owner-financing and have been making payments to the Owner, how much total mortgage have you paid? what is your payoff balance? Your Total Mortgage Amt-The Amt paid to the Owner is equal to your paid-in Equity. What is the hotel currently appraised at? If you don't know, check the hotel address on the local Tax Appraisal District rolls. add 20% to the appraised value. This is the commercial appraised value. Give the hotel address to a commercial realtor, and have them get you some "comps" for similar hotel properties in your area and market. This is your FMV(Fair Market Value). Compare FMV and commercial Appraised Value to determine true sale value of the hotel property.  Take the Amt of Paid-In Equity and divide it by the Average Comp Value times 100. this gives you the percent Equity you have invested in the property. For Example: If the hotel Comp Value is $1.2MM, and you have paid in $300,000, your equity is 0.25 X100 =25%. To acquire a loan of any type, you will want to have between 25%-50% Equity invested in or available to invest in your project to acquire a loan. Once you know this information, then I would consider an SBA 7A or SBA 504 Loan for between $1,200,000-$4,000,000 depending on your Equity!

              For Example:   $1,000,000     $250,000 in Equity     SBA 504/7A- $750,000

                                    $2,000,000     $500,000 in Equity     SBA 504-$1,500,000

                                    $3,000,000     $750,000 in Equity     SBA 504-$2,250,000

                                    $4,000,000     $1,000,000 in Equity  SBA 504-$3,000,000

              If you have insufficient equity, sell stock or commercial paper for additional equity. Be sure to check the hotel financials and liabilities, taxes, other loans, lawsuits, etc before applying for a new loan to make sure you can get clear title to the hotel, property, and other important hotel assets such as payroll reserves, equipment loans, hotel lines of credit, etc. Seek the help of a qualified attorney, accountant, and real estate specialist before you start.