I have read some great advice to others on this site, so I am hoping that someone can help with my situation. I am considering the purchase of a specialty printing business that has been operating within the same family for 50 years. Great tax returns for the last 5 years, with an average annual net of $225K as owner benefit. The business is offered at 500K. (Around 175m in assets, the rest is goodwill)
Also, have option to purchase the (light industrial/retail) real estate on which the business operates available for an additonal 600k ( price is at tax assessment) instead of paying the lease of $3200/month. The RE is shared with another business which pays $2500/month for their space.
I have around 20% to put into it, but would rather hang on to as much as possible for working capital/expansion.
I have good business experience (14 years), and an excellent credit history.

My question(s):

-Can you recommend any lenders?
-What type of loan/terms can I expect?
-What's the benefit of SBA loan versus non?

I appreciate any advice!

Jorriols


-Can you recommend any lenders?
Sorry, I do not recommend lenders.

-What type of loan/terms can I expect?
You are probably looking at a maximum of seven years fully amortized {all of the money gets repaid by the end of the seven years}. It might be possible to do it with 20% down, but you probably want 25%.

-What's the benefit of SBA loan versus non?
An SBA guarantee or a similar guarantee would be a must for this loan. Otherwise, it would not fly for most lenders. Tangible net worth is negative to begin with.

Other comments:

- You probably need more money or a partner.
- The property might be a good investment down the road, but one thing at a time. Use this as an opportunity to extend the lease and get a long-term option on the property.
- I would introduce the idea of partial seller financing. Even a $50,000 note would make the deal stronger.


Good luck

If I was presented with a financing plan that indicated 65% of the total purchase price was goodwill I would be concerned. I would not finance the goodwill portion for this type of venture and would be hesitant to finance the remaining.

Placing a correct/accurate value on goodwill is a difficult if not impossible task given the intangible nature, even with very well know businesses (i.e. quantify the value of goodwill for McDonald's). In many cases the goodwill resides with the person running the business and not necessarily with the business itself. For example, in the case of the printing company, the present family has had 50 years building their reputation; would it be reasonable to expect that a new owner who is not a part of this family could maintain this loyalty? The only way that this can be answered it to 'wait and see'; unfortunately lenders don't like to lend against the unknowns.