In my experience working with the "right banks and financial institutions" repayment ability sometimes overrules collateral pledged by someone needing financing for a business purchase or a down payment.
Arranging to get needed financing for business purchase opportunities with limited collateral to pledge is possible by seeking the loan from an institution in the SBA lender network. While a number of people who've given up the role of company employee - whether or not by choice - want to purchase their own business to insure their future, a major obstacle to this plan is to come up with the necessary cash.
The Right Lenders - SBA Loan Program May Be Solution
Banks and other institutions offering SBA-backed loans, such as the SBA 7(a) loan program, can provide an solution for the would-be business owner who finds himself in this difficult position: A terrific business opportunity has been discovered, but the business buyer doesn't have the collateral usually required to get a business acquisition loan. Yes, he may have some cash remaining after meeting the down payment agreed on, but the available funds will be required to satisfy the business' operating capital needs. Borrowed cash may be needed to complete the deal to buy the business.
The benefit of working with an SBA-backed lender is that the loan officer will follow the Federal agency’s guidelines, which often place emphasis on cash flow of the business when there are not enough assets to fully secure the loan. Conventional lenders, by contrast, are less oriented to factoring in seller discretionary earnings generated by the business, when reviewing a loan application.
Analyzing Cash Available To Pay Off Financing For Business Purchase
The loan or financing underwriter may be willing to excuse the borrower's inability to put up enough collateral to fully secure the loan amount if it's obvious the business can generate the funds needed to repay the obligation. But getting approval of a request for financing for business purchase objectives may be particularly difficult if the borrower is unable to persuade an SBA-backed lender that the company generates enough cash to support the loan payments. Confusion about how to calculate a company’s cash flow, and determine whether it will enable the new owner to meet the principal and interest installments, may cause a buyer to lose a deal even if there will be ample funds remaining for loan service, after all cost of sales and overhead expenses have been deducted from gross revenues.
One difference in the way a borrower and a lender calculate revenues available for repayment often hinges on how each evaluates add-backs. Non-recurring expenses also can confuse the issue, with the buyer showing where more earnings can be anticipated than are shown in the company's financials.
The aid of a skilled and professional specialty loan and financing advisor that specializes only in business purchase financing (and has the long time reliable contacts) often can resolve the disagreements when a buyer is having trouble getting needed financing for business purchases.
About The Author: For over 25 years Peter Siegel, MBA has provided niche business purchase financial advisory and loan brokerage services with SBA Loans, Non-SBA Loans, Retirement Plan Conversions, Hard Money, Bridge Financing, Note Restructures, etc. He assists with financing for: Business Purchases, Business With Real Estate Purchases, Franchise Resale Purchases, New Franchise Purchases, Pay Off Existing Seller Notes, Partner Buyouts, Employee Buyouts. Peter Siegel, MBA can be reached direct toll free at 925-785-3118 regarding getting professionally pre-qualified, advisory & loan placement services.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence
Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.
|Helen Yoo, New Century Escrow - Escrow Services In Southern California
New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.
|Brad Steinberg, Broker - Laundromat Specialists
PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.
|Shalonda Chappel-Pilgram: Escrow & Bulk Sale Services - Southern California
Escrow services to brokers/agents, sellers, & buyers. Established 43 years. Extraordinary service. Experienced with handling difficult transactions. One stop for all your escrow needs: Bulk sales, lien searches, UCC searches, liquor license transfers, publishing & recording services. 951-808-3972.
|Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA
California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.
|Peter Siegel, MBA, BizBen Founder, Lead Facilitator - ProBuy, ProSell
Founder & President Of BizBen.com (since 1994) & BizBenNetwork.com. I am the Lead Facilitator for the ProSell & ProBuy Programs on both platforms. I consult daily with business buyers, owner/sellers, and intermediaries daily about buying and selling businesses. Reach me direct at 925-785-3118.
|Elizabeth McGovern: Escrow Services - San Francisco Bay Area
McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.
|Janet Carrera: Escrow & Bulk Sale Service - SF Bay Area
Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.
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|Financing A Business Purchase With Limited Or No Real Estate Collateral
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