Financing your Business Acquisition

Determine how much cash you have available: Many business sales can be seller
financed – if you have a reasonable down payment. You will also need a little extra to cover
some of the initial business expenses (lease transfer, utilities, business license, etc.) and
any working capital needs. Of course, how much you will need depends on the size of the
business and the actual deal. In some cases, you may be able to purchase a business with
as little as ten to twenty percent down payment, but most will require at least thirty percent.
Do you have the cash available? Consider your savings, stocks or bonds, and retirement
accounts (special programs now exist that will allow you to access funds without penalty).
Or, perhaps you can sell one of those big ticket items you rarely use or really don’t need at
this time. Recreational vehicles, investment properties, etc. can provide the cash resources
that will enable you to purchase a business. Start planning now – you don’t want to lose an
opportunity just because you can’t access your cash in a timely manner.

Personal loans: Banks and finance companies offer a variety of personal loans. Some
are very restrictive and only loan small amounts, while others can offer more. Interest rates
and terms will vary. It generally depends on your employment and credit history. Start by
approaching the bank with which you have already established a good relationship.

Credit Cards: Look at the available cash advances and consider the interest rate and
monthly payments that would be required. It may or may not make sense to take a cash
advance to finance all or part of a business acquisition; but, it helps to know how much
might be available.

Family and friends: Although friends and family members are often reluctant to provide
money (loans or gifts) for a business purchase, it never hurts to ask. Anyone seriously
interested in providing funds for your new venture will need to be involved in the process –
including meetings you have with us. That way, they will better understand what it takes to
buy a business, stay informed about the entire process, and be more inclined to support
your venture even after the purchase. You should have a well thought-out plan that clearly
describes how you will operate the business. There’s nothing better to show how serious
you are about your venture than a written business plan. This plan will also open your eyes
to things you may not have considered regarding successful business ownership.

Home equity loans: In general, home values have increased substantially over recent
years. If you've owned your home for a few years, it might be worth exploring. Many
prospective buyers voice concerns about tying-up their home equity; however, anyone
seeking SBA financing needs to understand that the SBA will place a lien against a home’s
equity and possibly other assets. If you have enough home equity to apply towards a
business purchase, it may make better sense to access it directly.

SBA loans: Many banks offer SBA guaranteed loans, and it is usually best to find one that
is a “Preferred SBA Lender.” These banks can approve your loan “in-house” rather than
forwarding the loan application package to the SBA for approval. The SBA loan package is
very extensive and requires information on the business for sale in addition to the buyer’s
personal information. Go to sba.gov for a full explanation on SBA funding.

Business plans: A business plan is required for SBA funding. As previously mentioned, it
also makes good sense for anyone running – or thinking of running – a business to write a
detailed plan. Check entrepreneur.com, score.org, and similar sources for more information.
Interest Rates: Get the latest information on interests rates at BankRate.com

Credit Scores: Learn all about credit scores at MyFico.com

Credit History: Once a year, consumers can obtain a free credit report from all three of
the main credit reporting agencies (Equifax, TransUnion, and Experian). These are
available by going to AnnualCreditReport.com

(Note: Many firms advertise “free” credit reports; our experience shows that most will
require you to enroll in some sort of service before you can obtain the report. Always
read the fine print!)