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    3 Replies Latest reply on Jul 7, 2008 5:28 PM by Adducent

    purchasing a shoestore

    shoestore Newbie
      I am looking to finance the purchase an established childrens shoe store.it has been listed at $ 125,000 with a 10 % discount if purchased by Aug. 1. I have good credit,Score above 700 and $15,000. cash .Any suggestions as to where to start?
        • Re: purchasing a shoestore
          djwst26 Newbie
          I dont know where you are located , but usually you would start with a bank in your area that specializing in commercial loans or small business loans. Because the you have the basics in your favor, most people dont start out with working capital. Look in the yellow pages under Banks, one example: The Bank of Brevard for commercial banking (www.thebankbrevard.com )Do you have a Business Plan, if not this was where I put one together. Minority Business Development Association (www.mbda.gov) . I hope this gives you something to work with.
          • Re: purchasing a shoestore
            LUCKIEST Guide
            purchasing a shoestore, Welcome to this web site.

            *Good luck in *purchase an established children's shoe store. You start at the beginning. Tell us more. Where are you?? like city and state??. How long has this shoe store been in business?? Have you seen prior tax returns??
            Do you have a Lawyer?? Have you been to your local bank??

            Again Good luck, LUCKIEST
            • Re: purchasing a shoestore
              Tracker
              Hi,

              There are so many important things to cover when buying a business that it is not practical to put them all here in reply to your question. But I will try and list here the high points that you should look at first:

              1. Do you know what they are basing their asking price on? Is that a fair and acceptable price?

              2. What is the revenue and net income of the business for the past 3 to 5 years?

              3. How strong is the balance sheet ... i.e. are their assets with value or is the business carrying debt?

              4. Will the owner carry back any financing?

              5. Do they have appraisals to prove the value they are putting on the assets?

              6. Check their financials for the last 3 years and see how sales and profits are trending. Are they going up, flat or declining?

              7. What do they forecast for the next 3 to 5 years?

              8. Can the financials be realistically re-cast to roll more to the bottom line; to more clearly show investors or funding sources the businesses ability to pay them back?

               

              There are many more questions but the above will be critical when it comes to putting together a plan to line up a financing package to buy the business.

              Putting other due diligence questions aside for now, it is possible for funding to be created for many types of acquisitions, using the assets from the deal itself and by crafting suitable deal structure with the business owner. That is one way to stretch the cash that you do have on hand so that you can buy more of a business. But it starts with finding out what you have to work with and then using it in the right way. You might want to consult a professional with experience to help you with that.

              Most small business sellers want cash; but in reality, in order to sell they must be willing to take back financing. Rarely do small businesses sell for all cash ... and frankly a buyer would be making a mistake if they did pay all cash. There are better uses for their cash and there is compelling reasons to have the seller have some sort of "skin" remaining in the deal. What does it tell you about their faith in the business if they won't carry back financing? If they demand all cash and you can't negotiate other terms then you may want to look at whether the business is viable long-term. You don't want to buy a business that is fading or going down-hill.

              Sometimes it is better to pass on a deal if it is the wrong one. I discuss that in detail in one of my books on buying businesses but simply put: "do not buy a business just because you can" ... make sure it is the right business for you to buy before you do the deal. So it is very important to make sure that you have established that price and terms of the deal are fair and that it is the right business for you and that it meets and passes all of your due diligence.

               

              Right now conventional bank funding can be difficult to line up unless you have a track record for them to rely on, great credit, personal guarantees and collateral. So you have to look at the acquisition from all angles to make maximize use of whats there to work with not only with your own resources but what the business can bring to the table itself. By doing that kind of work, evalution & analysis of the deal and by being prepared you greatly increase the odds of lining up the funding and financing to buy the business.

              I hope the above helps you or gives your some direction.

              Let me know how things progress; feel free to contact me if you'd like to discuss your deal or if you have other specific questions and I'll help you with what feedback I can give you.

              Dennis Lowery
              Adducent, Inc.