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/ Business Financing / Individual Clients / Financing Options
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Seller financing to qualified Buyers is
common in the acquisition of closely held corporations. Seller financing is a
vote of confidence to both the Buyer and financing institution. Imagine
yourself in the Buyer that when the Seller refuses to finance any part of the
purchase. It raises suspicions immediately that something is wrong with the
business or the Seller has little faith in the Buyer. Such financing is usually
structured as a term loan.
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Seller only pays tax on the down payment and not on the note amount.
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Seller gets a good return on his money and a nice monthly income.
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Seller is protected because they get monthly P&L, Balance Sheet, Right to
Offset, etc.
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If buyer gets into trouble, the seller already knows because of the monthly
reports.
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Together they work out the problem, maybe seller doesn’t get a payment or two
but business continues.
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Business continues, buyer’s down payment is safe and sellers note is safe.
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Employees jobs are safe, creditors are safe and clients continue to get goods
and services
Seller financing to qualified Buyers is
common in the acquisition of closely held corporations. Seller financing is a
vote of confidence to both the Buyer and financing institution. Imagine
yourself in the Buyer or banks shoes when the Seller refuses to finance any
part of the purchase. It raises suspicions immediately that something is wrong
with the business or the Seller has little faith in the Buyer. Such financing
is usually structured as a term loan.
-
Seller only pays tax on the down payment and not on the note amount.
-
Seller gets a good return on his money and a nice monthly income.
-
Seller is protected because they get monthly P&L, Balance Sheet, Right to
Offset, etc.
-
Buyer gets into trouble, however seller already knows because of the monthly
reports.
-
Together they work out the problem, maybe seller doesn’t get a payment or two
but business continues.
-
Business continues, buyer’s down payment is safe and sellers note is safe.
-
Employees jobs are safe, creditors are safe and clients continue to get goods
and services
There are an incredible amount of
advantages to owning your own small business. Not only will you enjoy the
challenge and freedom of being in charge of your own company, as a small
business owner, you will find many avenues of support to guide you along your
journey.
One way to find financial backing is through small business loans. The
government runs the SBA (Small Business Administration) as a way of promoting
and expanding the strength of small businesses. By acting as guarantor for
low-interest, long and short-term loans, the SBA can help you bring your dream
of owning a small business into today's competitive market.
If you are interested in obtaining a loan for your small business, the SBA can
work with you and your preferred lending institution to make it happen.
Commercial banks, community support organizations, and microlending are all
there to help you gain access to small business loans with the SBA as
guarantor.
With SBA small business loan programs, the SBA sets lending standards to match
your small business financial needs, and your lending institution administers
the loan according to these standards. While commercial business loans may be
impossible to back with your initial capital investment, SBA programs provide
the credit necessary to ensure that your business venture is a success.
SBA's many loan programs are designed to assist with your small business loan
needs. The basic 7(a) guaranty is the main program by which small businesses
can gain access to loans they might not otherwise be able to receive through
commercial lending institutions. Basic 7(a) guidelines allow you to use the
loan to invest in equipment and machinery, to acquire land and cover building
expenses, to spend as capital, and, in some cases, to cushion accrued debt and
allow you to continue running your business for eventual profit. Depending on
your spending needs, repayment plans can stretch up to 25 years.
Small businesses with more specific loan needs can find a version of basic 7(a)
tailored to match their expenses. These may include small business loans that
are meant to provide your existing business with the necessary assets to expand
or improve, and to purchase real estate.
Microloans, SBA's 7(m) program, allow you to receive short-term small-business
loans in small amounts, up to $35,000. These loans can be used to help with
immediate cash-flow needs as well as buying supplies and equipment to furnish
your small business. Microloans also ensure that your local lending institution
will assist you in producing and managing your financial plan.
Most small businesses receive startup funding from their owner's personal
assets, along with assistance from family, friends, and business partners, as
well as high-interest credit advances. SBA loans make it easy to gain the
capital you need to run your own business, without the danger of high-interest
debt piling on your personal accounts. By acting as a guarantor that supports
your interests, the SBA makes small business loans work for your company.
Did you know you can use your 401K or any
other retirement funds for buying a business without paying taxes or penalties?
Many individuals have the necessary down payment to buy their own business in
their retirement funds. Typically, every dollar of down payment is equal to a
dollar of annual business earnings. In other words if you can come up with
$250,000 from your retirement funds, you can put down $250,000 on a business
that makes $250,000 per year (remember to not deplete all of your funds on the
down payment, keep out a few dollars for operating capital).
Tax laws in America prevent savers from dipping into their 401K, IRA,
profit-sharing, or annuity plans. In fact, in many states, you'll lose more
than 50% of your funds in taxes and penalties, just for accessing the rainy-day
savings you've worked so hard to accumulate. A program is available that
provides a perfectly legal, perfectly simple approach to help you acquire down
payment money with your savings. The program allows you to release the money in
your retirement funds and use it for buying a business - without penalty, and
without taxes. The program was started specifically to help people like you
acquire the financial freedom of owning your own business. Many people have
been affected by downsizing or outplacement, and find themselves with money
tied up in a retirement account while looking for ways to become their own
boss. You can have significant savings from elimination and/or reduction in
taxes on your money and use it to pursue the American dream. You can use the
money to purchase a franchise, buy an existing business, or start your own
entrepreneurial venture. And you won't lose a penny by doing so. The program
may be just what you need to begin your bright new future. A future you
control. If this sounds too good to be true, then we invite you to talk to
hundreds of new business owners who have benefited from our plans. Hundreds of
individuals just like you have benefited from the services to start or buy
their own companies using their retirement funds, without distributions,
penalties, taxes, or the use of loans.
Did you know you can use your home equity
for buying a business ? It is much easier to borrow from home equity than going
through a business loan. Plus interest on an equity line is deductible on your
personal tax return. Most SBA loans require you to put your house as collateral
anyway. So it makes sense to borrow money against home equity to buy a
business. It saves time and money.
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Loans from friends and
family |
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Approaching family and friends for
funding can be an easy and flexible route to finance. Approached in the right
way, this type of funding can provide a fast, affordable solution to your loan
requirements.
Benefits
Friends and family are more likely to be able to offer you a low interest loan,
or one with no interest attached at all. They will probably consider lending
over a longer period than conventional sources and may be willing to adjust the
terms of the loan. As people who know you well, they will also be a good judge
of your character and are less likely to need a detailed business plan from
you. See our guide on borrowing from friends and family.
If you have been turned down by conventional sources, consider whether you
should approach your friend or family member for a loan at all. Be open about
why these sources may have refused you credit and emphasize to the family
member or friend that they should not lend more than they can afford to lose.
Avoiding problems
Relationships are at stake if problems arise with an informal arrangement. This
problem can be avoided by getting some professional advice before you approach
friends and family for funding. Also, a well thought out business case and plan
will give the lender a picture of how your business is doing and how their
money will be put to use. Be open about the risks involved and outline
worst-case scenarios.
Draw up a formal agreement between both parties involved. Setting down terms of
the loan in writing will avoid the misunderstandings that often arise as a
result of verbal agreements. Include any tax implications for both parties.
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