Financing a business purchase, or getting cash for a down
payment can take many forms. Hopefully the options listed below
will give you some ideas where you can find the money to buy a
business!
Credit Cards - any buyers these days are tapping their credit
cards for their down payment to buy a business. The downside of
this option is that if you are getting an SBA loan to buy a
business, they won't let you use "a credit card/loan - borrowed
money" for the down payment. Other than that this option works
for many since there is no waiting for the money or cumbersome
approval process.
SBA Loans - Many businesses today are purchased with 7A SBA
loans. There are conditions however in getting one to buy a
business. You still have to put down between 15%-30% depending
on the lender, you must have good to excellent credit, and the
business has to have PROVABLE cash flow to support the debt
service of the loan. The loans are typically 10 years in
duration and 2-3 points above the prime interest rate. For more
information on SBA Loans to purchase a business go to:
www.bizbuyfinancing.com for more tips and ideas.
Home Equity - With home equity growing rapidly in California
many buyers utilize these funds to either buy a business or
utilize it for a down payment. At this time rates are low and
lenders are eager to give out home equity loans. Loans can
usually be secured rather rapidly, but plan ahead and get the
process moving so you don't miss out on any great businesses
that come out on the market for sale.
Owner Financing - This is the most common form of financing.
Usually the buyer will put down 20% - 50% (utilizing one of the
methods above), and the owner will carry back a note for a
duration of usually two to ten years. Interest rates vary but
they usually will be higher than banks or commercial resources.
Sometime there will be "combo" financing with the owner taking
back a partial note and the rest of the financing will come from
the above resources.
Retirement Plans - Many buyers have built up sizeable amounts in
their work 401K plans. There is a way to tap this money tax free
- put it into a "special trust" that then buys the business for
you. Many corporate refuges/individuals coming out of corporate
America are going this route.
Note Buy Out Firms - There are companies and individuals who buy
notes sellers have taken back. Get your possible deal in front
of these individuals to see if they would be interested in
buying out the note after you have completed the deal - this may
sway some sellers who want all cash for their deal and don't
know about this creative financing option!
They key to all this is to be creative - possible tapping
several of these sources to get your deal done. With all these
resources along with cash in the bank and possible some
relatives who may want to invest in your new business - you
should have no problems with the financing end of buying a
business!
© Peter Siegel, MBA - All Rights Reserved
http://www.BizBen.com *
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