I WOULD LIKE TO KNOW HOW TO GET A BUISNESS LOAN WITHOUT BUYING THE PREMISESS THE BUISNESS IS A VERY PROFITABLE BODYSHOP THAT I HAVE WORKED IN FOR MANY YEARS.

Baz:

Buying a business is the same as buying commercial real estate, the lender will take a look at the cash flow from the business as the source of repayment. This means that at one point the seller will have to provide copies of their financial information so that you can go apply for financing. In fact, this is something that you should ask from the seller even before you consider giving a bid.

Revenue and income are not as important as cash flow for the repayment. The lender is also going to want to see a sizable down payment from you and will create what is called a “pro forma” balance sheet and income statement to see how the company will look and perform after the loan is disbursed. You would really need to talk to a lender so that he could walk you through the process.

Off the top of my head, the lender is going to be looking for a couple of numbers from the set of “pro forma” statements. Take into consideration that all lenders have different leverage and debt service requirements so this is at best just an educated guess.

The numbers are:

- A leverage ratio as shown by debt to worth of no more than 3
- A debt service coverage of at least 1.25

In other words “total liabilities” including the proposed loan can not be more than 3 times your equity contribution, and the cash flow from the business should pay the loan’s principal and interest at least 1.25 times.

Good luck

my father and his business partner sarted a small buiness in 1997. it nets over 500.000k a yr, now. his partner has a secound child on his way and has no time to spare for the company now, being he is a furnerla director and his time is limited. my father on the other hand loves to work and is retired from kodak, he wants to keep making this grow. ive worked there part time running the shop since 2000 and feel its time to own the other half of the company so it is truely, family owned. the profit margin has grown 100k each yr and we keep getting more veihcles for our fleet. im am going to attempt to get 150k to buy off partner. my dad is one hundred percent behind me on this . due to a seperation , ive sold my house and will not have that collateral anymore, will that go agaist me? can my dad use his 8 00k inventory as cllateral for me?i have many questions, but do not want to lose this oppertity .

bill d,

Generally lenders are looking for the following three sources for repayment of their loans:
1. Cash Flow
2. Collateral
3. Credit worthiness of the borrower

If one of the 3 is missing, the other two must compensate for the third. The first two items on the list are much more important than the third.

On the surface, this sounds like a do-able deal. Talk to your local bank or your dad's business bank. One of them should be able to assist you. This deal might have to go for SBA financing and the banks should be able to help you. If not, call a commercial loan broker.

Good luck and keep us posted!