Can you finance the purchase of one of our business offerings?
The short answer is yes.
A qualified buyer with a good strategy for running the business will find a sympathetic ear when talking with a bank to help fund an acquisition.
We have been trying for some time to dispel the misperception that banks are not lending money. In fact, they are actively looking for deals to fund.
We have had numerous conversations with bankers looking for ways to put their money to work so they can earn interest on it and begging us to bring them deals to finance.
The negative publicity about bankers comes from a couple of sources.
First the politicians and the media have brought attention to the well-known problems of the really large financial institutions. These issues are generally not relevant to the community banks or SBA lenders that fund small businesses. However, it is commonly interpreted by the public to also apply to small community banks.
Second there are a lot of folks who are mad at banks for not financing deals that, after closer review, do not make economic sense and involve too much risk for anyone to finance.
Another misperception is that bankers getting SBA guarantees on loans really slows down the process, which it used to but seldom does these days.
In fact there are several bank and non-bank groups doing exclusively SBA guaranteed loans that are great to work with and respond with timely decisions. The only down side now to SBA guaranteed loans is the financing charge that can run up to 3% of the loan, but that in many cases makes the difference between getting funding or not, so is worth the expense.
We often see deals listed and advertised as being SBA approved or bank approved. That only means that the bank will consider making the loan required, after a down payment of 20% or some other substantial amount, depending on the qualifications of the buyer!
Financing institutions want to see buyers have a good credit record, relevant skills and background, and a good business plan to go forward with the business they want to buy. Some kinds of businesses really require relevant experience for a buyer to be qualified to run them, for example restaurants or machine shops, others, like small motels or convenience stores, are easier for buyers to take over and learn to manage on the job.
Financing some deals is done by sellers, either fully or partially. We have sellers who say “I will not do any” and at the other end of the spectrum some want to seller finance the whole deal for tax and retirement planning purposes.
If a seller is willing to finance at least part of the sale of their business, that exhibits a high level of confidence in the strength of the business. BUT a wise seller will require the same background checks that a bank will before handing over the keys, and will usually want a bigger down payment.
If we have a business listed on our web site, we believe there is some way for a qualified buyer to finance it. Part of our responsibility to our clients, the sellers, is to make sure we only talk in detail to customers about their business after we find out the customer has the money and background to become a buyer. In that way we also help customers save time, effort, and emotion by not chasing after impossible deals.
So to reiterate the central point, yes if you have the down payment and relevant experience as well as a good strategy, you can get the financing needed for an economically viable deal.