Financing .... in todays world.
Financing.
It is a single word that has many factors, directions, and situations. Gone are the days where a signature and an ID would get you up to 125% financing on real estate, and the SBA was eager to promote the America dream of business ownership. Simply put, we live in a different world, so YOU must THINK and ACT different.
Today's idea is factored into thinking creative. (No Im not talking about those late night informercials that promise everything and deliver nothing). I am illustrating that you must think in terms of MULTIPLE financing to accomplish your aquisition and sometimes selling goals.
Let's look at an example;
Business #1 - Restaraunt offered at 150K.
First, we want to accomplish THOUROUGH DUE DILLIGENCE, as ALL your lending will require the same. After that, think in this order;
1. Seller Held Fiancing. Most business transactions are accomplished this way and we are seeing more and more real estate being transfered with seller held fianancing. For business transactions try to get 50 to 75% of the purchase price seller financed, and for real estate 25-35% is a good objective.
2. Equipment Lease - Some banks will offer loans on your equipment based on their standards. However, banks are VERY VERY conservative now, so do not expect to get a loan for the full purchase of the equipment. 50% of CURRENT value is probable.
3. Small Business Unsecured Loan/Line of credit - a quick Google search on this will bring up a multitude of queries. Simply put, this is nothing more than a revolving credit account kinda like a credit card. Forget the 0% intro fee, you are better doing a single digit fixed rate for the life of the card. Average is 5k up to 25K.
4. Family, friends, coworkers. This is like seller fiancing with a twist. The good part is most want to help you and will at great rates. The bad part is if you do well, they want more...and if you do bad, you will be reminded of it...daily. Think in the 10% of purchase price.
5. Savings, 401K, IRA, Annunites. Always check with your tax professional, however most people will qualify for early distribution if in guidlines of purchase.
6. Angel Investors / Hedge funds - Great for funding, but expect to give up the MAJORITY of equity in the company.
7. SBA loan - There is still funding available through the 7a guarantee loan program, however it is not a easy as filling out a form. You can get some financing, but expect to jump through a lot of hoops.
Though it is more difficult in securing quality financing, the savy investor will find a way to exploit current market opportunities.