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How to Buy a Business
If you are looking for a business to buy, we can help you in a number of ways:
Contact us to talk to a business broker about the businesses we have for sale, advice on how to buy a business, and to be the first to know about businesses when we put them on the market.
Buying a business is different than buying anything else. Part of the job of business brokers for the sellers we represent is to screen buyers to be sure they are qualified before giving them confidential information about their business. We need to know that you have the down payment and related experience to buy a business
We offer a free consultation to buyers. We have experience and training in buying and selling businesses and can answer the questions you have about buying a business. By having a face-to-face meeting, you take a step that shows us that you are a serious buyer.
If you want active help finding a business to buy, we can provide fee-based assistance. We will actively work to find a business for you to buy and represent you in the entire process of buying the business. Contact us for more information.
FREE BUYER CONSULTATION
Our process to help you buy a business starts with you filling out an NDA on a particular business you are interested. This gives us preliminary information about you. The next step is a face to face meeting. This gives you the opportunity to get your questions answered about buying a business. We can give you information about businesses that you are interested in and discuss them with you. It gives us the opportunity to get to know you better so we can do a better job of finding the right business for you. It also shows us that you are a serious buyer because you took the time to have this meeting.
There are probably many questions you have about how to buy a business
What is the right business for me?
What is the process to buy a business?
How can I figure out how much I'll make out of a business?
How much should I pay for the business?
How much can I loan to buy a business and where can I get the loan?
What questions should I ask when buying a business?
You can get the answers to these and other questions about how to buy a business answered when you meet with us. There is no cost or obligation to this meeting.
Contact us to talk to a business broker about the businesses we have for sale, advice on how to buy a business, and to be the first to know about new businesses we have for sale.
The Four Steps of Buying a Business
Buying a business can be a complex and timely, but we can help you through the four main steps.
Step 1
Searching for a business
Buyer signs a Confidential Disclosure Agreement, and a Qualifying Questionnaire before information is given on the interested business. Then we share the specific information, location, and other pertinent information.
Step 2
Fact-Finding Meeting
A fact-finding meeting takes place between the Buyer, Seller and Broker. In this meeting, there is no negotiation on price or terms, but rather an exchange of questions and information specific to the business and its operations.
Step 3
Buyer Due-Diligence
We help you submit a Contingent Offer and provide a refundable escrow deposit.
Together we provide specific information, Buyer reviews leases, contracts and other assumable agreements before performing a detailed review of all aspects of the business, financial, and its operations.
Step 4
Closing and Ongoing support
Once the Buyer has confirmed that all contingencies have been met and Due Diligence is satisfied, Buyer, Seller and Broker meet at designated location to sign final documents, and money is transferred.
GETTING A LOAN TO BUY A BUSINESS
Business Loan
Most business buyers will use a business loan to buy a business. We help business buyers get a loan to buy the business we are selling. This is usually a seller loan or SBA loan. Most of the sales we have handled have been financed with SBA loans.
We can help a business buyer get an SBA business loan. This is desirable for both parties. The seller finances little or none of the sale. An SBA 7A loan allows the buyer to put down a lower down payment, typically 20% of the purchase price, and finance the purchase over a longer time, 10 years. The loan, a 504 loan, can be 20 years if it finances the purchase of real estate or equipment. We are getting businesses pre-qualified for SBA loans to help sell them. We advertise the low down payment that is required to buy the business. Our Confidential Business Review helps a buyer get financing by providing a report about the business that they can use when applying for a business loan.
Most sellers would prefer that a buyer get a business loan to buy the business from a lender. The buyer may not be able to get it if the financials of the business are not good enough or the business tax returns do not show good results for the last three years. Seller financing may also be needed if the lease that the buyer will get on the business premises is not as long as the term of the loan. A lender will not make a loan with a longer term than the length of the buyer's lease. Seller financing may be required to make the sale.
A loan from the seller is the quickest and easiest way to finance the sale. The buyer normally puts down 40% to 50% and the rest is financed by the seller over 3 to 5 years. The assets of the business are the typical collateral for the loan. As noted above, we get credit information from the buyer for you if this is how the sale will be financed.
Other sources of the money needed to buy a business are:
Self-Directed IRA - There are companies that can convert a buyer's IRA to one that is self-directed and the money in it can be used to buy a business.
Home Equity Loan - This is a quick way to finance the down payment or purchase price. It also is usually the lowest interest rate for the buyer.
Credit Cards - There are many businesses that got started, or financed, on a credit card.
Friends and Family - If these people are going to finance the purchase, we do require that they verify this directly with us.
SBA Loan to Buy a Business
Only 10% Down Payment Required for an SBA 7A Loan
Most of the businesses we sell are financed with an SBA business loan that the buyer obtains. This is a win-win for the buyer and seller compared to seller financing. The seller receives most, or all, of the price at the closing and the buyer can finance the purchase for a longer time with a lower down payment using an SBA loan. We are very familiar with SBA loans and help buyers find a lender that can provide the SBA loan.
An SBA loan comes from a private lender and is guaranteed by the government. There are three classifications of SBA lenders with "Preferred SBA Lender" being the highest. The benefit of getting an SBA loan from a preferred SBA lender is that they can approve the loan, rather than needing the approval of the SBA. Also, their people are generally more familiar with the SBA loan process. They are more likely to process the SBA loan quicker.
The primary SBA business loan used by business buyers to buy a business is the 7A program. A 7A SBA loan is used to purchase business assets, such as inventory, working capital, equipment, and goodwill (the excess of the purchase price over the value of the underlying assets). Effective January 1, 2018, the down payment requirement has gone down to 10%. The term of a 7A loan is typically 10% and the interest rate is about 2.75% over the prime rate. A 504 SBA loan is used to buy real estate and long-life equipment. It normally requires a 15% down payment and the term of the SBA loan is 20 years. These are normally fixed interest rate loans. Today, a typical interest rate on a 7A loan is around 7% and on a 504 loan, it is around 5%.
In order for a business buyer to obtain an SBA loan, the business and the buyer need to qualify. The business, through its tax returns, must show that it provides enough money to pay the buyer's income needs, repay the SBA loan, and provide a margin of safety. The buyer must be creditworthy and have satisfactory business experience.
We are experienced dealing with SBA loans. If you are looking for a business to buy, contact us. If you buy the business through us, we can help you get the SBA business loan to buy it.