View Full Version : Getting a Loan to buy an existing Business

02-20-2014, 03:23 PM
Hi Everyone,
I'm trying to figure out a way to buy an existing business that is for sale. The owner of the company wants to sell it for $100,000 by the end of the year. She needs the full money and is not willing to go over a period of years. The company has revenue of about $240,000 a year. Because she wanted to sell the company, she used all profit from this year to pay off existing debt. The only debt in the company is $13,000 owed to a contractor for services rendered. She currently has a plan with the contractor to pay that debt off. It is projected to have about $75,000 - $100,000 net after payroll and expenses for next year (2015). About 3 to 4 years ago, the company did have problems with credit and an IRS bill that was due. She settled with the IRS with a stipulation that the business can never be late on taxes again. She has paperwork to prove that this is all taken care of and not an issue anymore.

Personally, I have excellent credit and am looking to take money from a 401K or a sale of our house to come up with about $30,000 which I'm hoping is enough to help me with securing some type of loan or investor for the full $100,000.

More about the history if it's important at all:
I was the original programmer of their core software they sell. I left the company about 6 years ago for another opportunity that I couldn't pass up but stayed in touch with the owner. I am currently an employee receiving a W2 with a different company. Since I left, the company I would like to buy has not re-vamped the software and has existed in more of a maintenance mode. The owner is 68 years old now and wants to retire. She would like to see me take the business over and has opened the books and anything else I need. She knows I could bring the software to current standards and make the company grow again. I have a Business Administration degree as well as a Computer Information Systems degree. I am working on a business plan but don't know how far into the future I need to take it. I've never purchased a company before so I'm learning as I go.

Does anyone else have some suggestions on the best way to secure a loan / investor to help with this venture?

02-20-2014, 05:50 PM
Your best bet would be to try the bank where you do your daily banking business. Of course they should just be the first one you go and see, get offers from every bank possible.

If the figures stated above are correct and you have the papers to prove it, and with you financing 30% of the price yourself, I think the banks should be quite happy to give you a loan for the 70k which you are missing.

02-21-2014, 02:04 PM
Your best bet would be to try the bank where you do your daily banking business. Of course they should just be the first one you go and see, get offers from every bank possible.

If the figures stated above are correct and you have the papers to prove it, and with you financing 30% of the price yourself, I think the banks should be quite happy to give you a loan for the 70k which you are missing.

I also advise this. Just ask your normal bank. You already have 1/3th of the total amount which is good but it could be better.

02-27-2014, 12:55 PM
Since you have all the information about the business assets and profit expectations, and you have a large portion of the amount needed to purchase already, I'd shop this around to many different banks to find the best deal on a loan. You are already appealing to lenders, because you've got good information and a lot of the money. They would love to compete for your business, and in this way you get the best available interest rate and you can work with the right people to see you through the process.

02-27-2014, 01:22 PM
It's already been a week. Have you gotten in touch with other banks and gotten better offers?

02-27-2014, 06:40 PM
I feel like you would have a good chance of getting a loan from just about any bank. I would suggest another way though, see if anyone else is willing to go partners with you in this business and fiance it together.

Executive Capital Finance
03-01-2014, 03:37 PM
If the gross annual revenue is $240,000 and the net annual revenue is $75,000 (at a 31.25% margin, not bad) which is $6,250 net monthly. A $70,000 bank loan will typically run 7-10% (for those with excellent credit) and you should ask to spread it out over a 3 to 5 year term. A 7% fully amortized loan over a 3 year period would have a monthly payment of $2,161 which is 34.5% of the $6,250 net monthly revenue. Good so far because it still leaves $4,089 in monthly ($49,068 year) net cash to live on and for miscellaneous business items that will come up later. Granted, it won't allow you to buy a ton of inventory if needed, or any other unplanned expenses that come up but if operations can be streamlined, more dollars can be brought to the bottom line. The issue I see with this scenario is that the bank is going to want to secure the loan with collateral in the form of assets (business and/or personal) worth at least double the loan amount. The question is whether or not the business you are buying owns $140,000 worth of tangible, marketable assets. If it doesn't, you need to find them elsewhere or find a guarantor with them.

03-01-2014, 08:27 PM
It's good that you have all the information ready about the assets and profits. Because you have all the proof you need and is already capable, banks wouldn't have a problem with loaning as the business is appealing. I would go to different banks to see what deals would become of it. Compare the different interest rates to know what is best.

11-26-2014, 10:34 PM
I think you can go ahead with loan for boosting up business so that you can do something more on your business that you want to do.

11-29-2014, 07:20 AM
Now a days there are facilities available for getting loan. You can take loan from banks also. There are many online banks available in the internet from where you can get loan. Have you listened about internet based currencies like bit coin, panda coins and others you can save this currencies and invest them in future, this is also one of the option to raise money for your business purpose.

03-09-2016, 11:24 AM
One question I would have is how much in profit the company makes per year. Then I would take that amount and come up with an NPV (Net Present Value) of these cash flows. That will tell you what the company is worth.

But it will also tell you how much (for the $70k-$100k) you should be willing to pay for the funds you need (in dollars). I have a article on the best sources of business capital. Not selling anything. To read it, click here (http://www.hasslefreeadvances.com/free-cash-flow/).

But I do want to say that in most cases, taking on a partner will cost you more than even the worst of loans.

Jane Mann
05-06-2016, 12:56 AM
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05-15-2016, 04:47 PM
If you have excellent credit, and any kind of relationship (or referral) with/into a commercial banker, it is possible.

The most important thing for the banker to see is the last 2 years of the businesses tax returns.

After that, it would be last two years financials (plus YTD)... i.e., income statement and balance sheet. Equally as important as financials, would be a personal financial statement.

If the business is valued at $100,000 (or even better if the valuation is more than your cost), you'll probably be expected to have skin in the game... of around $25k.

06-07-2016, 02:04 AM
Your best bet would be to try the bank where you do your daily banking business. Of course they should just be the first one you go and see, get offers from every bank possible.

If the figures stated above are correct and you have the papers to prove it, and with you financing 30% of the price yourself, I think the banks should be quite happy to give you a loan for the 70k which you are missing.

03-26-2018, 07:03 AM
I likewise exhort this. Simply ask your ordinary bank. You as of now have 1/3th of the aggregate sum which is great however it could be better.

03-29-2018, 05:20 AM
I moreover urge this. Basically ask your conventional bank. You starting at now have 1/3th of the total which is incredible anyway it could be better.

07-23-2018, 05:37 AM
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The Boss Life
08-02-2018, 04:01 PM
This was four years ago... So, how did it go?

09-07-2018, 12:40 AM
Here are the typical rates, fees, and repayment terms of an SBA 7a loan to buy a business:
Loan Amounts. With an SBA 7a loan, you can borrow up to $5 million to put towards the purchase of a business. ...
Interest Rates. ...
Fees. ...
Repayment Schedule. ...
Personal Credit Score. ...
Down Payment. ...
Collateral. ...
Industry Experience

11-15-2018, 11:03 AM
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