I am trying to purchase a business and associated real estate. Here are the particulars:
about 0.2 acres in a historic district amongst $1M+ homes; 2 bldgs, 1 is a barn (elec only) that rents to a local carpenter for personal use, the second is a 1200 sqft house with a store front on first floor and studio apt on the second. Rental income is about $12K year. The store gross is conservatively $400K - its currently a "convenience" store. I think we can increase the gross by 50-75% by changing the product mix.

The asking price is 850K which is a high I think. I am bit fuzzy on determining the value of the land and the business, but my current thought is the business value is about $150K (25% of gross, $20 inventory, $30 beer/wine license; there are really no other business assets of substance). Land value, based on the income approach; I am not exactly sure how to do this - if we assume the store would rent for $1,500/mo, thats $18K/yr + $12K for the apt/barn, at an 8.5% cap rate, thats $353K (30,000/0.085).
So, $500K total. I have no idea what any comps would be, but I do know the land would get a significant premium because of its location. I am thinking $600K for the land and $150K for the business is about right.

So, I am trying to figure out how to finance this 750K. My credit score isnt high enough to go to a bank and I was also told its too low for an SBA loan. I can come up with 10% of this, but not 20%. Maybe I get the seller to hold 10%. I would like to keep the debt service around $5K/mo.

The problem for me seems to be that lenders want to finance the land and business seperately. I can get 80 LTV on the real estate, but I dont too much about how to finance the business. Plus the term is shorter which pushes up the payments and I get the sense that 80 LTV is too high for the business.

Whats the best way to present this to people so I can quickly find the right people to be working with. I have talked to a couple banks, someone who does SBA 504 loans, and a non-conforming lender that specializes in obtaining and funding diffucult loans. Plus I have started discussion with another that does small business loans.

Any recommendations on how I should try to finance this given my low credit and only 10% of my own cash? Also, how to find lenders that can put this together. Thanks

My comments...you need a passive, money partner who can supply the credit to buy this deal. The landscape is filled with hungry money lenders, ready to do this type of deal, but only with a deep pocket guy up front. You keep your 10% as the first dollars into the restructure. Gives you a stake in the development and your partner will feel good about you having real cash invested. Start with a non-binding letter of intent with the seller for, say 30 days, to secure financing. Then take your LI to prospective investors and find out how much of the deal they will let you have...10%...maybe as high as 1/2. Good luck.

The only solution to shaky or non-bank/SBA credit is more money down. Perhaps find somone in the community who is familiar with the location and who is looking to get a higher than stock market return on their money. Look for local business people, doctors and lawyers. Be prepared to show them a business plan and a background in operating a convenience store. There are plenty of people who are looking for passive investment opportunities. It may take some time and require a great deal of legwork on your part, but that is the only solution I see to overcome the need for more funds.

I will ask my US associate if she wants to have a look at this proposition and will contact you further if she does.

Graham