Hello,
I noticed there are several SBA loans for different purposes. I would like to
know what type of loan would apply to purchase an existing business?
The business sells for $140,000 and offers shakes and smoothies. My wife
would work full-time on the business while I maintain my engineering job. We
currently do not own a business nor have business experience so this would be
our first one. Our only issue is that we do not have plenty of money for a
downpayment.
Thank you.
If that business is really in a good condition then definitely the bank going
to give you loan against that business or you can get loans against mortgage.
Before you go any further, make sure that you read a series of good articles
about this subject in the sba site, just look for “Buying an Existing
Business”. You really need to run the numbers on an opportunity like this
one. Not only to make sure that the opportunity is worth it, but that is
worth $140,000.
There is one thing that I liked about your post and it is something that
might make it possible to make this happen. When you said “…My wife would
work full-time on the business while I maintain my engineering job…” ,
you open the possibility to use a global cash flow for repayment calculation
in case that the business itself shows tight repayment ability. This is a
good thing.
The type of loan that you can get depends on many factors. But assuming that
we are talking about a non-real estate transaction, the lender will be
looking at a fully amortizing term-loan with a maximum term of seven years.
This means that the business should show enough cash flow to repay all of the
principal and interest in seven years.
Before you go any further, make sure that you read a series of good articles about this subject in the sba site, just look for “Buying an Existing Business”. You really need to run the numbers on an opportunity like this one. Not only to make sure that the opportunity is worth it, but that is worth $140,000.
There is one thing that I liked about your post and it is something that might make it possible to make this happen. When you said “…My wife would work full-time on the business while I maintain my engineering job…” , you open the possibility to use a global cash flow for repayment calculation in case that the business itself shows tight repayment ability. This is a good thing.
The type of loan that you can get depends on many factors. But assuming that we are talking about a non-real estate transaction, the lender will be looking at a fully amortizing term-loan with a maximum term of seven years. This means that the business should show enough cash flow to repay all of the principal and interest in seven years.
Good luck
From my discussion with a friend that specializes in SBA lending. {he is a
banker that does a lot of SBA loans, but he is not an SBA official}, this
much I learned.
- In a business acquisition, he can go up to 10 years.
- If there is real estate involved, there are ways were the whole loan can be
up to 25 years.
- For a business acquisiton without real estate, the equity needs to be 20%
- If the seller is willing to take a subordinated position, and put that
subordinated debt into partial standby. That can be counted as part of the
equity.
- The whole deal like most commercial lending depends on cash flow. So it is
time to get familiar with that concept, and the concept of debt service
coverage.
lasily01 | Window Shopper | 11/14/2012 - 5:14 am
to give you loan against that business or you can get loans against mortgage.
loanuniverse | Window Shopper | 8/6/2012 - 2:36 pm
about this subject in the sba site, just look for “Buying an Existing
Business”. You really need to run the numbers on an opportunity like this
one. Not only to make sure that the opportunity is worth it, but that is
worth $140,000.
There is one thing that I liked about your post and it is something that
might make it possible to make this happen. When you said “…My wife would
work full-time on the business while I maintain my engineering job…” ,
you open the possibility to use a global cash flow for repayment calculation
in case that the business itself shows tight repayment ability. This is a
good thing.
The type of loan that you can get depends on many factors. But assuming that
we are talking about a non-real estate transaction, the lender will be
looking at a fully amortizing term-loan with a maximum term of seven years.
This means that the business should show enough cash flow to repay all of the
principal and interest in seven years.
Good luck
loanuniverse | Window Shopper | 8/6/2012 - 3:42 pm
banker that does a lot of SBA loans, but he is not an SBA official}, this
much I learned.
- In a business acquisition, he can go up to 10 years.
- If there is real estate involved, there are ways were the whole loan can be
up to 25 years.
- For a business acquisiton without real estate, the equity needs to be 20%
- If the seller is willing to take a subordinated position, and put that
subordinated debt into partial standby. That can be counted as part of the
equity.
- The whole deal like most commercial lending depends on cash flow. So it is
time to get familiar with that concept, and the concept of debt service
coverage.
kburger | Community Moderator | 8/6/2012 - 11:29 am
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