buying a small business, broker turned me down?
Posted January 30th, 2009 by admin 5 Comments »
skater4fundude asked:
I’ve been shopping around on craigslist with some success, but just recently tried the bizbuysell website. Found a few good ones I want to look into, filled out the confidentiality agreement with a broker that listed all my finances on it. He called me and pretty much told me I can’t buy a business if I wanted to and that I need at least $100K cash on hand to buy one. I have $20K on hand, $40K stuck in the UK, $45K stuck in inventory, and $50K worth of credit card credit. I was requesting info on a $130K business and a $185K business. He went on to say you need at least 50% down to get owner financed and banks aren’t lending right now specially for restaurant purchases, blah blah. It doesn’t make sense to me because the broker is pretty much turning away a potential customer. I mean, do ALL business sellers require 50% down? When I was looking at a smaller one for $40K, the seller only wanted 20% down.
I’ve been shopping around on craigslist with some success, but just recently tried the bizbuysell website. Found a few good ones I want to look into, filled out the confidentiality agreement with a broker that listed all my finances on it. He called me and pretty much told me I can’t buy a business if I wanted to and that I need at least $100K cash on hand to buy one. I have $20K on hand, $40K stuck in the UK, $45K stuck in inventory, and $50K worth of credit card credit. I was requesting info on a $130K business and a $185K business. He went on to say you need at least 50% down to get owner financed and banks aren’t lending right now specially for restaurant purchases, blah blah. It doesn’t make sense to me because the broker is pretty much turning away a potential customer. I mean, do ALL business sellers require 50% down? When I was looking at a smaller one for $40K, the seller only wanted 20% down.
When I look at it logically, the business is $185K and reports a $100K annual net profit. So if I even managed to put $40K down, that leaves $145K that I could pay back FROM the earnings of the restaurant. I just don’t get it. TONS of people don’t have 10-20% for a down payment on a house, so how can people possibly expect people to have 50% for a business (that makes money vs a house not) especially in this economy? Also, doesn’t with owner financing, if I were to fail to pay, wouldn’t that mean the owner would repo the business pretty much?
*confused*
I’d realllllly like to buy another business though :/
http://www.ihearclear.com/