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small business loan to purchase existing business

by lrw89, Window Shopper

  • Created: January 18, 2012, 7:21 pm
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Hello SBA board,My husband and I are interested in purchasing an existing business which we will need a small business loan for. When my husband inquired about the business he was told that there are virtually no financial records available. My question is if there is any way to secure a loan to purchase the business without the financial records? Is it possible to approach a bank with a business plan written as if the business didn't exist and with future financial projections?? I know there are a host of other problems with buying a business that has no financial records, but first I would like to know about the loan situation. Thanks!

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BizResearcher | Window Shopper | 2/1/2012 - 11:11 am

The fact that there are no existing financial records sends up huge red flags. Has the business paid taxes each year? If so, then you should be able to obtain a copy of the tax returns. If they haven't, then you could be liable for back taxes if you purchase the business. I doubt that a bank would grant a loan without solid proof of the business's income and expenses. Is it possible that the current owner could close the business, then allow your husband to purchase the assets of the business and start a new business? You might do some digging into the business's reputation and background. Start with their filing with your secretary of state's office or county clerk. It may not be in your best interests to take on the name, and therefore the past history, of the business if they don't have a solid reputation.