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Small business loan help.(5 posts)

Small business loan help.eyebob
Dec 8, 2003 1:45 PM
I'm looking to get a small business loan to buy a practice. The financials look good, it's had a recent appraisal and the "business" has grown steadily each of the last 12 years. Question. What's the best source for small business loans to buy an existing business? The seller will not carry the loan so I'm having to go out and find the money. If all things were equal, would you suggest going to a bank? a credit union? or hit up the RBR board for $500,000?

No seriously, any advice? What rates would I be looking at?

Dec 8, 2003 2:55 PM
Small Business Administration. Contact your bank and ask them about SBA loans. It ain't like a carm, though. No 15 minute turnaround on this one. Be prepared to spend a lot of time and effort with it, as well as shelling out some of your own money.

Credit unions don't typically lend money to purchase a commercial enterprise.

Remember that if you are credit worthy, the bank will lend you money because it intends to make a profit. They are not doing it because you're a swell guy, so if you can get credit from one bank, it is highly likely you could get it from another bank as well. It pays to shop around. Be tough and negotiate for the best rate you can get.

Don't know what it is you are planning on buying, but half a mil is a bunch of dough. And if the seller is not wanting to carry the loan, my red flag goes up. Typically a small business owner will finance with a series of payments, as that is most favorable from a tax perspective. Spreads the burden out over several years instead of one. He may also want out because he has used up all his goodwill and needs to hit the streets. Or he could just want to sever ties because he is tired of it. Whatever it is, make sure your due diligence is complete.

One more thing - when you find a banker to work with, you have found a great resource. Believe me, if he loans you money he really DOES want you to be successful. Use him a lot!

Whoa! Signed off wrong.moneyman
Dec 8, 2003 3:00 PM
Did you know that %% is right next to $$?

Good advice, and a few thoughts....eyebob
Dec 10, 2003 11:31 AM
I've done a lot of work investigating this potential buy. I've worked in the practice for 2 years and it's a steady (usually busy) place. I don't think that the owner is bolting because he's used up any good will. He's actually going to stay on and run a portion of the practice for 3 years after the sale. I approached him about carrying the loan but he didn't want to (it's funny, because my CPA recommended that we go that way to, but he doesn't want to. Oh well, his loss)

When I talk to the banks, how do I negotiate? I mean what am I negotiating? the interest rate on the loan? What terms can I dicker with?

Thanks for the advice. Any other thoughts?

yeah, moneyman knows his moneystuff.dr hoo
Dec 11, 2003 4:44 PM
I can think of a reason why someone does not want to carry the loan. Usually, if there is no shady reason, it is because they don't want to HAVE to take the business back in case of default. It's peace of mind to know it is done with and they can move on into retirement, or onto something else and not have to come back to a VERY messy situation and try to clean up.

Interest rates are of course the big thing you can negotiate. Other things might include an additional line of credit. Heck, you can even ask for free or reduced safety deposit boxes if you want. Make a wish list of everything you will want to do over the next X number of years. Will you expand? Will you remodel? Will the bank cut a deal on a second loan for those purposes should it come about? Do they offer corporate credit cards, and can you get those at a good rate?

On another note, you can learn a lot about a banker from HOW they negotiate with you, no matter WHAT they end up offering. Do they take your ideas in stride, or do they look at you like you are a moron for even ASKING for something? As $$ said, you will be dealing with this person for a long time, so being comfortable with them and their style is worth something.