I am a pretty successful sales executive in the telecom world, but am looking to start working for myself. I have to admit, I have a business background and a degree, but it sure seems like the more I research financing options the more confused I get.

My main question is this, I currently work out of a home office and have a pretty flexible lifestyle. I am fairly certain with my wife's help, that I could purchase an existing business and continue to work for my current employer for a given amount of time. Over the last 3-4 years, I have averaged $300-500k a year and look to be on not too far off this year (although it is heading downward, hence one of the reasons for looking for a change). My question is how positive would a commericial lendor look at my keeping my "day" job, if at all, in terms of ability to repay the loan, and would this serve as a subsitute for collateral and/or other requirements for an SBA loan, for instance?

As a sort of hypothetical, I am looking at a business (a convenience store/gas station) for around $950k that nets $350 on $3M in sales. If I were to go SBA, what might my down payment requirements need to be? In addition, if the seller is willing to carry some paper (assumably suborndinate), does thing count towards equity in terms of the dp for SBA?

Thanks, sorry if these are dumb or repetive questions.

Karasdad:

I guess that since looking at the numbers is all that I do, the first thing that I did after reading your post was to concentrate in the revenue and income numbers and realized that you were surprisingly accurate about them. The income is around what a gas station with $3MM in revenue would do. However, you failed to account for rent expense, which by looking at the purchase price you will probably have.

Now to your questions:

” My question is how positive would a commericial lendor look at my keeping my "day" job, if at all, in terms of ability to repay the loan…” Having another source of revenue is good. However, this means that you will have to hire a manager and the salary will be added to operating expenses.

” and would this serve as a subsitute for collateral and/or other requirements for an SBA loan, for instance?…” The only thing in my mind that substitutes collateral is collateral. While there are certain SBA specific requirements, your biggest hurdle is to get past the bank’s underwriting requirement.

” what might my down payment requirements need to be? In addition, if the seller is willing to carry some paper (assumably suborndinate), does thing count towards equity in terms of the dp for SBA?” I would say that after financing, your balance sheet should have no more than a 3 to 1 Debt to worth ratio. Subordinated debt is always good, but don’t count on owner financing as your only source of net worth, the lender is going to want to see your own money at risk. Also if this is a purchase of a going concern without real estate there really isn’t any tangible collateral. The lender might want some.


Good luck, and feel free to help in my charity drive.