I am considering buying an existing business that has been around for 5 years with good cash flow. I have a family member who has worked at this business for 18 years. It was previously in business for 20+ years before new ownership. They want 3 million. There is land & buildings inventory equipment, etc. would I need $600k? I don’t have that. I do have good equity in my home about 200k plus 100k in the bank. I spoke with a bank who said they do need 5% down. Am I wasting my time if I don’t have 600k? I have spoken with different lenders and they do say the need to see tax returns to make a determination. I guess I need to talk to more banks or understand if I could put less then 20% down. Any advise or insight will be helpful.
Thank you for your Question: You are correct about the 5%, SBA required 10% down. However, 5% must be cash from the buyer and the other 5% can be in the form of a seller carryback note. The 7a program would be a good program for this. Keep in mind that family gifts can be considered a part of your cash equity, however it cannot be borrowed so using a HELOC to get the cash you need isn’t an option unless you have outside source of income to support that HELOC payment. You can check out a guide that I created about acquisition financing that can give you more information at http://paultlong.com/buyabusiness-2/
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