People frequently ask me, “I am looking to buy a business, what are the best resources that are available to me to finance that business?” First of all, most small businesses, businesses that are under two million dollars in sales are very difficult to finance. Many of our clients at Vested Business Brokers call us and say, “I have an eight hundred FICO score, the bank loves me, I have a million dollars in the bank, I am preapproved and I would like to buy a business.”
The first thing to know about how to buy a business is this: The buyer does not get approved, the business gets approved. The first thing that the bank is going to ask you for is three years of tax returns and they are going to look at the underlying business. If they are comfortable taking the risk on the business then they will take the risk with the buyer. Then they will look at your FICO score or Fair Isaaac score and they will see if you make sense to them to take that capital risk in that venture.
Do you have experience in that business? I would tell you that 99.9 percent of the deals that get done under the two million dollar threshold get done with seller financing. With a seller who is running that business, he gets a substantial down payment, 40 to 50 percent down, and he is willing to hold the paper with you.
Everything is negotiable, the monthly payment is negotiable, the interest rate is negotiable, and the length of the loan is negotiable. You are working with someone who understand the business, sometimes if it is a seasonal business you can double up payments in the summer and you could have smaller payments in the winter. You can’t do that with a conventional bank.
That is the beautiful part about our business. If you have the down payment we are going to get you the financing to get the deal done. The first step is finding out in your heart what you like to look at. I always tell everybody to not put themselves in a box. If you like the pizza business but there is a manufacturing business in food that earns a lot of money and that you could run, go take a look at that manufacturing business. Don’t put yourself in that box of one category.
Understand your expertise and then find a business that you can use your expertise and your skill set to grow. For instance, if you are a salesman, a sales based business might be helpful. If you are an engineer, a manufacturing business might be better suited for you.
We will find you the right business and we will stay with you until you find it. If you have the down payment, 99.9 percent of the time you can get your funding.
Good luck with your journey, it starts today and there are opportunities all around you. We have sold some fabulous companies and sometimes I wish I would have bought them myself. I look forward to helping you if we can it would be our pleasure. We can be found at Vested Business Brokers, www.vestedbb.com. Thank you.
