Loans to purchase existing business?

Vipergrün · 12-07-2013, 12:44 PM

Hello all. Found a couple of interesting business opportunities. I don't have enough liquid cash to buy outright and it has been challenging to find a way to finance.

1. Home equity loan - approved, but cannot be used to buy a business.
2. SBA loan - won't have access to required tax docs and full financials until AFTER an offer is accepted, cannot submit offer without funding, chicken/egg.
3. Friends and family - yeah, well....

Anyone know of other ways to obtain financing?

Thanks!
-Brad

dondarnell · 12-07-2013, 12:52 PM

#2. Typically, the parties sign an NDA, and exchange the financial statements. You can always make the deal contingent on finanancing.

Vipergrün · 12-07-2013, 03:05 PM

Quote:

Originally Posted by dondarnell

#2. Typically, the parties sign an NDA, and exchange the financial statements. You can always make the deal contingent on finanancing.

Thanks Don. Yeah, seems obvious, but the broker/seller will not provide the information without an offer, or seeing source of funds. The seller had also indicated they were willing to carry some of the balance, but for some reason they want to see at least 100% funds available.

-b

RANDY P · RANDY P's Garage

should've just applied for the HELOC and don't tell them what it's for- none of their business. Just declare miscellaneous home improvement, next time.

Hint hint.

HHI944 · 12-07-2013, 07:10 PM

Quote:

Originally Posted by Vipergrün

Thanks Don. Yeah, seems obvious, but the broker/seller will not provide the information without an offer, or seeing source of funds. The seller had also indicated they were willing to carry some of the balance, but for some reason they want to see at least 100% funds available.

-b

something doesn't seem kosher there.....I know someone who just bought a business and had to get a loan for it....the former owners were more than happy to provide financials etc with a signed NDA

recycled sixtie · recycled sixtie's Garage

Quote:

Originally Posted by HHI944

something doesn't seem kosher there.....I know someone who just bought a business and had to get a loan for it....the former owners were more than happy to provide financials etc with a signed NDA

944 is spot on here. Who in their right mind would buy a business if you could not access the financials first for perusal. Without this info it becomes a guessing game.
It is near impossible to establish an offer without establishing the earnings from the business among other things....debts etc etc

It is tantamount to the seller of a car saying that a PPI is not allowed.

LeeH · 12-07-2013, 08:01 PM

Quote:

Originally Posted by HHI944

something doesn't seem kosher there.....I know someone who just bought a business and had to get a loan for it....the former owners were more than happy to provide financials etc with a signed NDA

Agree. Typical procedure is NDA, disclosure, offer, due diligence. Anything else would make me really nervous.

The UPS store near me was for sale. They wanted to do the same thing - offer then disclosure AND they wanted a none refundable "application fee" of several thousand dollars. Yeah, right.

KFC911 · 12-07-2013, 09:02 PM

Quote:

Originally Posted by RANDY P

should've just applied for the HELOC and don't tell them what it's for- none of their business. Just declare miscellaneous home improvement, next time.

Hint hint.

I'm sure the lender doesn't care, it's the "other guy" that wants to know the source of the funds and is balking....at least that's how I interpret it. I've had a HELOC for years and have used it several times for various purchases (properties) which I pay off in short order....lender has no clue what I do with the $.

mreid · 12-08-2013, 04:42 AM

Quote:

Originally Posted by LeeH

Agree. Typical procedure is NDA, disclosure, offer, due diligence. Anything else would make me really nervous.

The UPS store near me was for sale. They wanted to do the same thing - offer then disclosure AND they wanted a none refundable "application fee" of several thousand dollars. Yeah, right.

^^This^^

You would have to be crazy to commit or buy a business without due diligence. Can't you make an offer contingent on both their financial solvency and your ability to procure credit? Happens all the time.

speeder · speeder's Garage

Quote:

Originally Posted by LeeH

Agree. Typical procedure is NDA, disclosure, offer, due diligence. Anything else would make me really nervous.

The UPS store near me was for sale. They wanted to do the same thing - offer then disclosure AND they wanted a none refundable "application fee" of several thousand dollars. Yeah, right.

That's brilliant. If they make enough on "application fees", they might not have to sell the business. That's a business in itself...hmmm

Seahawk · 12-08-2013, 07:06 AM

Quote:

Originally Posted by Vipergrün

Yeah, seems obvious, but the broker/seller will not provide the information without an offer, or seeing source of funds. The seller had also indicated they were willing to carry some of the balance, but for some reason they want to see at least 100% funds available.

I have no issue with the part I put in bold. I recently sold a business and would have had more tire kickers than if I was selling a '68 Pontiac Firebird in Mobile, Alabama unless I put contingencies in upfront: One of which was you show me yours then I'll show you mine

Also, NDA's don't mean squadouche unless you have the means to enforce them.

There are also other routes for financing: First and foremost, do you have a detailed business plan?

LeeH · 12-08-2013, 07:40 AM

Quote:

Originally Posted by speeder

That's brilliant. If they make enough on "application fees", they might not have to sell the business. That's a business in itself...hmmm

I just remembered that I had posted about this at the time. They refunded half of the application fee if you changed your mind.
http://forums.pelicanparts.com/off-topic-discussions/623786-ups-store-sale-give-us-15k-well-show-you-numbers.html

Vipergrün · 12-08-2013, 08:43 AM

Thanks for the replies. Just to be clear, I would have FULL access to all financials after the offer is accepted. Seller was tired of flakes and wants to make sure buyers can actually buy. My satisfaction of financials would be a contingency. All funds deposited into escrow would be refunded if contingencies on either side were not removed.

Yeah, no way I'd buy without looking or give an 'application fee' :--)