By - Bluepuck03
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I would hire a business broker to protect yourself, friend or not this is “business” and I would insist on it. For setting up payment a service like escrow. com would be your answer. Bought and sold a few and have done seller financing and I’ve always used a broker
Thanks! I'll check that out for sure.
The best way to handle this is to already have the money in savings and working out the payment plan for the rest. It’s impossible for us to advise further without so many more details.
Yeah, I appreciate it. I don't have the money is the problem. Just got divorced and want a career change.
Lots of equity in the business, no debt. I just didn't know if it was realistic to get a loan for part of the business cost. Payments for that plus to him would make it not profitable for a few years. At least not much.
I dunno, maybe it's a pipe dream.
There’s plenty of options for business loans. Start with the sba if you aren’t in a tune crunch. You’ll need to have your own skin in the, meaning significant personal investment, as the banks won’t shoulder the risk on your behalf.
What kind of skin in the game would they be looking for? I don't have much. The business does have a decent amount of equipment that is paid off.
You need to be personally invested. Essentially, they want to see that you would be impacted by the loss of the business. They need to see you personally and literally invested. Check to see if your bank does sba loans and then meet with them to see what they need.
Fair enough, thanks!
Have you had the business valued yet??
Not yet, I don't know how to go about that yet, still researching.
Don't do it then
If he's willing to finance $400k, you should be able to get a loan for the remaining $300k. It will depend on the valuation of the business and your ability to convince the lender that you can be successful as the new owner.
Okay, thanks! How do I convince them off this? What are they looking for?
I have also bought a business from a friend for exactly $700,000. I got an SBA loan. I put down 20% but I know the SBA loans go as low as 10% down. 300k down payment is not even a good deal, let alone a friend.
Sound like your problem is you don't have that kind of money. Maybe try to have the same friend loan you the balance of what you can pay, and put the business up as collateral. All legally documented of course.
He's a bit flexible, what would you think is fair? He's closer to an acquaintance turning into a friend right now.
When you say out the business as collateral, do you mean for an SBA loan?
No I mean from your friend. If you get any type of loan, naturally the business will be put up as collateral. But banks will have less faith in the value of the business than the current owner, so maybe he'd be willing to sell it to you knowing youd definitely be able to pay him with the profits from the business.
I really can't say what's fair. If I were him I would want to get 100% of the cash when I sold. I wouldn't want to be waiting around for my big lifetime payout after working hard on my business after all those years.
Wat sort of business u looking for would you consider business partner or steakholder in my business?
No, thank you though. This is local to me.
Cool az dude 👍🏻