I want to buy an existing business. What is the best source for financing?
Frank M asked:
I went to business school specifically because I wanted to start my own business. I thought bankers would take me seriously if I had a degree in finance and management. I’m stuck in a crappy cubicle job, and I hate it. I want to break out and head on down entrepreneur avenue.
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I went to business school specifically because I wanted to start my own business. I thought bankers would take me seriously if I had a degree in finance and management. I’m stuck in a crappy cubicle job, and I hate it. I want to break out and head on down entrepreneur avenue.
I’ve browsed around some of the Business Broker websites, and have found a few likely candidates, but I don’t want to approach the current owners to request financial statements and tax documents until I know I can arrange financing.
I’ve been down to the SBA, twice, and they told me I had to speak to a bank about the financing. So I went to a couple banks and asked them specifically what the requirements are for a loan of this nature. They just gave me the blow-off.
Does anybody know where to go to arrange for financing to purchase an existing business? Ther preliminaries on many of these listings indicate that they could easily service any associated debt.
May 20th, 2009 at 1:55 am
if you visit this site n try get in touch wid the owner u wil discuss better with you
May 20th, 2009 at 8:06 pm
Find Investor’s
May 22nd, 2009 at 6:43 pm
The best source of financing is from the seller.
May 23rd, 2009 at 12:30 pm
I’m assuming that you already have a business picked out that you want to buy. If you don’t then that is probably your first step and I wouldn’t bother with the financing right now. For business to buy I would look to work with a successful brokerage who is going to take the time to truly understand your needs.
As far as the financing goes, a third party bank should be your 3rd choice.
Number 1: As someone has already said, the seller is your best source for financing. They usually won’t give you 100% but remember that business are often hard to sell and so getting the owner to carry 50% or more is not that uncommon. BEWARE if they will not do any financing because it might mean that there is no money in it.
Number 2: After you’ve secured some owner carry I would go to the bank that the current owner does business with. They will know the deposits and will be more than likely happy to lend. If there are any current loans on the business try to keep them in place if the interest rate is favorable.
Number 3: Third party banks. Look to the SBA for a secured loan package if you can. This will make you much less risky.
Number 4: Take on money partners or sell chunks of the business to raise the money.
Number 5: Use the equity in your home or other properties as part of the purchase.
Number 6: Use your own money.
Best of luck to you!
Cyrus
May 23rd, 2009 at 12:42 pm
When purchasing an existing business, it is important to realize that you are assuming reliability for it’s future success and it’s existing assets, liabilities and customer base. It is also important to carefully examine the business’ strengths and weaknesses, recent financial statements and financial projections to properly evaluate its potential success and continued profitability. Although it seems that there is a lot to consider when purchasing an existing business, there is usually a better chance of success than from starting a business from scratch. And many times, it is cheaper as well.
Some view a failing business as a greater risk than a thriving one. However, others see this an opportunity to improve the profitability of a struggling business. In many cases purchasing it, and its existing customer and client base is cheaper and less time consuming than starting a new business and developing everything from scratch. If the purchaser of the business has knowledge of the industry the business is in, his/her strengths and new vision for the business could take the business to new heights of success and profitability.
Unless a buyer comes across an available business with unusual ease, sometimes finding an available business can take some time and a lot of hard work and research. Sometimes attorneys and accountants are good resources for business that are up for sale. Once a business is located, do your due diligence and research it by contacting the current owner and requesting to review its financials, preferably for the past five years.
To get funding for these situations is not difficult, it is only a matter of obtaining a business credit profile. Consult a professional mentoring company in this industry. Begin your search online, type in “strong business credit” (just like that in quotes) in google or yahoo. You will encounter many businesses that offer the business credit mentoring for $1000+ as a fee.
Good luck,
Ilya Bodner
Small Business Owner
Initial Underwriting Group