Small Business Financing

[Gimesalot]

DH has found an established business that he would like to purchase.  We have some money to invest, about $25k, but we are another $225k short.  We have tried looking for investors within our group of acquaintances; however, they are all tied up in other projects. 

Also, I have heard a lot of negative feedback about Small Business Administration loans.  The feedback has been mostly, that the loans are a hassle and difficult to get.  The SBA website is not instilling confidence that the process is straight forward.

In case it is necessary, DH ran the numbers and the business could pay back a 10 year loan at 7.5% APR. 

Does anyone have any experience getting funding to purchase an existing business? 

[pdxvandal]

Depending on where you are located, look into Community Sourced Capital and Puddle. Good alternatives to SBA.

[lakemom]

Has he negotiated with the seller to see if they would carry the note?  Many sellers will with a hefty down payment BUT business loans (from banks OR individuals) are typically 20-30% down and it looks like you only have 10%.  Is there real estate involved?  Maybe you could buy the "business" and lease the real estate with an option to purchase in say 5 years.

[Gimesalot]

Depending on where you are located, look into Community Sourced Capital and Puddle. Good alternatives to SBA.

Thanks for the suggestions pdxvandal.  I looked into both of these programs, but right now their size seems to be too small for this type of loan.

Has he negotiated with the seller to see if they would carry the note?  Many sellers will with a hefty down payment BUT business loans (from banks OR individuals) are typically 20-30% down and it looks like you only have 10%.  Is there real estate involved?  Maybe you could buy the "business" and lease the real estate with an option to purchase in say 5 years.

The seller has owned this business for a very long time and is ready to cash out and retire.  Unfortunately, there is no property involved.  The business leases it's location and there is no way we could afford to buy the building.  I estimate the building is worth $3.5 million, if it were even for sale!

[Weedy Acres]

Is $25K your entire net worth?

If so I would not advise going into that much debt for a business.

If not, what else could you liquidate to make this happen?

[Gimesalot]

Is $25K your entire net worth?

No.  This is a small portion of our savings.  About $13k was saved up for the purpose of at some point investing a in a restaurant.  The other money is just extra that's laying around in our trading account.  I have been very clear with DH that we will not borrow against our 401k, IRA, or house to buy a business.  We can recover from losing $25k very easily,1 year or so, but losing our 401k or our house, would be devistating.