Individual Financing Preparation- Business Financing Services, Financial Advisor

BUSINESS FINANCING >> Overview >> SunbeltNE Advantage >> Individual Clients

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One of the most important aspects of buying a business is getting finance for it. Advanced preparation for getting the appropriate finance helps in getting a loan to buy a business. It is hence very important for you as a buyer to be aware of the following key factors that lenders look at while saying yes or no to a loan.

	Key Factor 1
	In order to buy a business, you will need 15% to 30% of its total price as a down payment depending on if there is real estate with the business or if the business is being sold by itself. You can get this amount from many different sources like your savings, retirement money, etc.

	Key Factor 1
	In order to buy a business, you will need 15% to 30% of its total price as a down payment depending on if there is real estate with the business or if the business is being sold by itself. You can get this amount from many different sources like your savings, retirement money, etc.

	Key Factor 2
	Your credit rating should range between good and excellent. Bankruptcies or late payments damage the chances of a borrower, no matter how good the other criteria are. Get any bad reports in your credit history fixed before beginning the borrowing process. The lender will run a credit check on you early in the lending process to see if you qualify.

	Key Factor 3
	You will need to prove your experience to the lender. Lenders like a borrower who has experience in the business he/she is buying. Lenders also like management experience or buyers who have previously owned a business and know what it takes to grow and keep a business on track. You need to present your industry strengths and management experience in your resume so that the lender is convinced his money is in safe hands.

	Key Factor 4
	Write a mini business plan for the business you are planning to buy. This business plan should reflect your knowledge about the business and the industry as well as reflect your future plans with it once you own it. This plan can be a short outline (3-5 pages) of where the business has been, what is happening with it now, and what you plan to do to enhance it.

	Key Factor 5
	Positive cash flow (or seller’s discretionary income) must cover the debt service of the loan and provide an adequate income for you to support yourself and your family, otherwise you won’t get the loan. Lenders look closely at the tax returns of the business being sold – so if the seller is playing any games (not showing income or claiming excess deductions on their business tax returns), chances are you won’t get a loan. Ask to review the business tax returns early in the process of looking at a business and see if you can “add back” sufficient net income, depreciation, interest and owner’s salary to pay back the loan.

	Key Factor 6
	If you have equity in any real estate, it can work to strengthen the deal. Although this is not imperative to all lenders, it is advantageous is the other parts of your loan application are weak.

	Key Factor 7
	Does the business that’s being sold have management in place or key employees who will stay? Try to get commitments from existing key personnel and management to stay for a period – this shows the lender continuity of the established business and lesser risk after you take over.

	Key Factor 8
	Make sure there is adequate training after the sale. Lenders look for a training period to be anywhere from 1-12 months, depending on the type of business you are buying, your past work experience and how it relates to the business you are purchasing. Make sure you negotiate this point carefully in the purchase agreement.

	Key Factor 9
	Will the seller take back a note? If the owner is willing to take back a note (even a small one for 10-15%), it shows the lender that the owner is confident in the deal and is willing to take a chance on the buyer.

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