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Sgt. Ryan

Trying to buy a Business

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I have a good family friend who bought a second Ins agency about 30 miles from where her first agency was located for her retired Dad to run. He ran the business 2 yrs, and now he wants to retire, so she approached my wife and I about purchasing the agency. Currently this agency has renewal Sales of 1.45 Mil, with a 89% retention rate. The book hasnt been worked in 8 months and its still at 1.4 Mil. This second book is crippling my friend, as she has to work both books at once to make her numbers, and cant be in 2 places at once to do so. So she is selling the book at a reduced rate, the amount she still owes on her loan, which is about 100K less than its worth is if she sold it out right. I have been going through the loan process for a 400K loan, and the Vp of the bank stated to me today, after several meetings, business proposals, and plans, that the only way to get me finacned for 400K is through a small business or SBA loan.

 

The problem with this loan is they only finance 80% of the amount, which would be 320K, and on top of that, they require 20% down, to secure the 320K, meaning I have to give them 80K, then they turn around and give the whole 400K to my friend. She cant afford to take another 80K hit, as she still has a loan on the book for 5 more yrs, and owes 400K on the note.

 

So the question is, Is there a way around having to put down 20% for this loan. I have tryed to get a second mortgage on my home, but I have only been in the house 5 yrs and it only has about 30K equity thus far, as we rolled some other debt in that loan at the time of closure. My parents want to help, but they wont put their house up, which I dont blame them, and they can only give about 20K, right now. Ive looked into government grants, but they are coming up empty for what I have investigated.

 

Anyone have any info on SBA loans or now any ways around this dilemma.

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Become a foreigner. Then the gov will probably pay for everything and then some. It's a sad ordeal that's for sure. Talked to my girl who is in the mortgage business and she had no advice to offer you. So you have 30k equity and 20k from the parents, that leaves you 30k short. Definately need to talk to SBA and see if there's anything else you can do. I hope this business works out for you because you'll be out a sh*tload if not. Good luck sarge!

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I have a good family friend who bought a second Ins agency about 30 miles from where her first agency was located for her retired Dad to run. He ran the business 2 yrs, and now he wants to retire, so she approached my wife and I about purchasing the agency. Currently this agency has renewal Sales of 1.45 Mil, with a 89% retention rate. The book hasnt been worked in 8 months and its still at 1.4 Mil. This second book is crippling my friend, as she has to work both books at once to make her numbers, and cant be in 2 places at once to do so. So she is selling the book at a reduced rate, the amount she still owes on her loan, which is about 100K less than its worth is if she sold it out right. I have been going through the loan process for a 400K loan, and the Vp of the bank stated to me today, after several meetings, business proposals, and plans, that the only way to get me finacned for 400K is through a small business or SBA loan.

 

The problem with this loan is they only finance 80% of the amount, which would be 320K, and on top of that, they require 20% down, to secure the 320K, meaning I have to give them 80K, then they turn around and give the whole 400K to my friend. She cant afford to take another 80K hit, as she still has a loan on the book for 5 more yrs, and owes 400K on the note.

 

So the question is, Is there a way around having to put down 20% for this loan. I have tryed to get a second mortgage on my home, but I have only been in the house 5 yrs and it only has about 30K equity thus far, as we rolled some other debt in that loan at the time of closure. My parents want to help, but they wont put their house up, which I dont blame them, and they can only give about 20K, right now. Ive looked into government grants, but they are coming up empty for what I have investigated.

 

Anyone have any info on SBA loans or now any ways around this dilemma.

 

 

Are you by any chance a veteran?

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I got nothing.

Hope somebody here can help you out and you can get this done.

Good luck

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There is plenty of high interest credit to be obtained to get you the wrap around. But you will have to hustle like a mofo to stay ahead of the curve. Do you really want to take on that kind of debt? If so, you will be leveraged to the hilt in a business you dont know much about. But it can be done...

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Become a foreigner. Then the gov will probably pay for everything and then some. It's a sad ordeal that's for sure. Talked to my girl who is in the mortgage business and she had no advice to offer you. So you have 30k equity and 20k from the parents, that leaves you 30k short. Definately need to talk to SBA and see if there's anything else you can do. I hope this business works out for you because you'll be out a sh*tload if not. Good luck sarge!

 

I am talking to sarge via IM but

just in case anyone else cares...one avenue a small business can look to if they need quick cash is

Cash Advances on Credit Card Sales...now its not an optimum way to borrow money because the payback is expensive...a $10K advance would cost around $13.5K to pay back...but if the biz is doing in excess of $150K in CC sales there would be a very good chance that an advance for $30K could be had...the kicker is the current owner of the biz would have to be the one to do it and come to some sort of agreement with sarge about absorbing the debt at time of sale...its an out of the box way to look at it but sometimes you have to do what you have to do...

 

the other thing is that the Company advancing the cash is gonna make you(more then likely) switch to using them to process your credit card transactions....if you were to go this route...be very careful as there are a ton of companies that do this and to be honest some seem pretty seedy...i for one havent had to do this yet and dont think i ever will but that has more to do with the functionality of my POS Program having its CC Processing integrated in it and of course its proprietary so another processing agent would mean extra hoops and stuff to process a sale...not sure i can subject my customers to that...

 

good luck sarge...if anyone knows how frustrating the SBA and Banks can be its me :D

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There is plenty of high interest credit to be obtained to get you the wrap around. But you will have to hustle like a mofo to stay ahead of the curve. Do you really want to take on that kind of debt? If so, you will be leveraged to the hilt in a business you dont know much about. But it can be done...

 

 

this sounds like the correct answer to me.

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I'll recommend the SBDC again. They are in the know when it comes to alternate types of financing, they also work closely with local bank which helps streamline the process. When we went through this last year they actually found us a funding source that would cover 100% of the loan, granted it was a very unique community development fund. But without them we would of never known about it.

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Offer the seller a limited partnership, with her part being the 20K (5% of the total value of the business) you can't come up with.

 

You can give her a cut of the pie (as a percentage of sales), or buy her out over time with interest.

 

You may also approach her with a work-to-buy plan, where she pays you to work the business, until you make up the extra 20K to buy it outright. I think the legal paperwork on this is pretty simple. My sister-in-law did this, and it worked out great for her.

Edited by cre8tiff

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Offer the seller a limited partnership, with her part being the 20K (5% of the total value of the business) you can't come up with.

 

You can give her a cut of the pie (as a percentage of sales), or buy her out over time with interest.

 

You may also approach her with a work-to-buy plan, where she pays you to work the business, until you make up the extra 20K to buy it outright. I think the legal paperwork on this is pretty simple. My sister-in-law did this, and it worked out great for her.

 

This makes the most amount of sense to me and is commonly done in the investment business.

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So basically you have to get $20k as soon as possible... :D

 

Sounds to me like you need a movie montage! I would suggest Karate Kid background music "You're the Best... Around..." playing over scenes of you holding a bake sale, a car wash with bikini clad women, a bingo tournament, redeeming garbage bags of re-cycleable pop cans, etc.

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I'll recommend the SBDC again. They are in the know when it comes to alternate types of financing, they also work closely with local bank which helps streamline the process. When we went through this last year they actually found us a funding source that would cover 100% of the loan, granted it was a very unique community development fund. But without them we would of never known about it.

 

i have a meeting tomm with a guy at the SBDC

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You need to talk to a business broker, their entire job is to get something like this done, they know all the secrets. They don't work for free, but when you are talking about this kind of change, you need to have all your details checked by a pro. Let me know and I can get you in touch with one of best in the industry.

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They (the experts) say it's not a good thing to do, but do you have any 401K money? If you have a big enough nest egg started, I think you can borrow up to half of it and pay it back to yourself with interest.

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Offer the seller a limited partnership, with her part being the 20K (5% of the total value of the business) you can't come up with.

 

You can give her a cut of the pie (as a percentage of sales), or buy her out over time with interest.

 

You may also approach her with a work-to-buy plan, where she pays you to work the business, until you make up the extra 20K to buy it outright. I think the legal paperwork on this is pretty simple. My sister-in-law did this, and it worked out great for her.

 

 

This is an option we have discussed, as this business is pretty lucrative. About 10% commision on new sales, and Renewals, plus bonus, which can range up to 100K a yr, based on how much I hustle.

 

 

I appreciate the feedback, and Im open to any and all suggestions. This lender knows this business, as he owns the loan for my friend, and the monthly revenue is about 12K, with about 8 K in expenses including an employees salary, the bank note, office rent, supplies, phone, etc..... But this 12K a month is based off current renewals, not any business I chum up. My goal is 20K a month of new business. The real benefit is 7 yrs when the note is paid off and I free up 5500 a month. Until then, Im buying my time working my ass off for new business, to get ahead.

Edited by Sgt. Ryan

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So not a veteran, then...too bad. The VA will provide a loan for this kind of thing and back it 100%, so long as you own 51% of the business.

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I have a good family friend who bought a second Ins agency about 30 miles from where her first agency was located for her retired Dad to run. He ran the business 2 yrs, and now he wants to retire, so she approached my wife and I about purchasing the agency. Currently this agency has renewal Sales of 1.45 Mil, with a 89% retention rate. The book hasnt been worked in 8 months and its still at 1.4 Mil. This second book is crippling my friend, as she has to work both books at once to make her numbers, and cant be in 2 places at once to do so. So she is selling the book at a reduced rate, the amount she still owes on her loan, which is about 100K less than its worth is if she sold it out right. I have been going through the loan process for a 400K loan, and the Vp of the bank stated to me today, after several meetings, business proposals, and plans, that the only way to get me finacned for 400K is through a small business or SBA loan.

 

The problem with this loan is they only finance 80% of the amount, which would be 320K, and on top of that, they require 20% down, to secure the 320K, meaning I have to give them 80K, then they turn around and give the whole 400K to my friend. She cant afford to take another 80K hit, as she still has a loan on the book for 5 more yrs, and owes 400K on the note.

 

So the question is, Is there a way around having to put down 20% for this loan. I have tryed to get a second mortgage on my home, but I have only been in the house 5 yrs and it only has about 30K equity thus far, as we rolled some other debt in that loan at the time of closure. My parents want to help, but they wont put their house up, which I dont blame them, and they can only give about 20K, right now. Ive looked into government grants, but they are coming up empty for what I have investigated.

 

Anyone have any info on SBA loans or now any ways around this dilemma.

 

Sarge, I had to take out an SBA many years ago and unfortunately there really isn't any way around the additional 20%. I pretty had had to max out all of my credit cards, use the equity in my house and shell out a large sum of cash.

 

Luckily, the business is doing well so I've made up that 20% but I'll be jumping for joy once that SBA loan is paid off.

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I am talking to sarge via IM but

just in case anyone else cares...one avenue a small business can look to if they need quick cash is

Cash Advances on Credit Card Sales...now its not an optimum way to borrow money because the payback is expensive...a $10K advance would cost around $13.5K to pay back...but if the biz is doing in excess of $150K in CC sales there would be a very good chance that an advance for $30K could be had...the kicker is the current owner of the biz would have to be the one to do it and come to some sort of agreement with sarge about absorbing the debt at time of sale...its an out of the box way to look at it but sometimes you have to do what you have to do...

 

the other thing is that the Company advancing the cash is gonna make you(more then likely) switch to using them to process your credit card transactions....if you were to go this route...be very careful as there are a ton of companies that do this and to be honest some seem pretty seedy...i for one havent had to do this yet and dont think i ever will but that has more to do with the functionality of my POS Program having its CC Processing integrated in it and of course its proprietary so another processing agent would mean extra hoops and stuff to process a sale...not sure i can subject my customers to that...

 

good luck sarge...if anyone knows how frustrating the SBA and Banks can be its me :D

 

Good info here

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So basically you have to get $20k as soon as possible... :D

 

Sounds to me like you need a movie montage! I would suggest Karate Kid background music "You're the Best... Around..." playing over scenes of you holding a bake sale, a car wash with bikini clad women, a bingo tournament, redeeming garbage bags of re-cycleable pop cans, etc.

 

:D Nothing's gonna ever keep you down..........

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