Loan to to buy Muffler & Brake Business

Board Topic: Looking for loan to buy Muffler & Brake Business
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Looking for loan to buy Muffler & Brake Business

Posted by: Daye7373 Dec 14 2004, 08:46 PM
Hello ! my name is Daye . I am looking for a investor or someone who can do a commerical loan. I am interested in purchasing a Muffler & Brake shop.
The sales price is $ 75k but I would need operating capital. About 50k more.
At this point the store is grossing about 250k. w/three employees.
I have worked in this type of business for over 20yrs. I know once given the chance I could really turn this place around.
The last place I worked was Meineke it grossed somewhere between 750k
and 785k. which isn't bad for a 4 bay shop.
The shop I want to purchase is not a Franchise which cuts out the middle man , and it's in a prime location the present owner is retiring.
I don't want to ramble on about this because I get excited when I talk about this so . I close asking if there is anyone that can help . please don't haste. Maybe the one that help me may allow me to help someone.

Posted by: loanuniverse Dec 14 2004, 11:20 PM

I think that your best bet would be to look for an investor first, and a lender second. Your post seems to indicate that you not only need to borrow the full purchase price, but you also need an additional $50,000 to run the business for a while. I have been involved in commercial lending for about nine years and I am yet to find a bank lender that would finance 100% of an operation with no equity component. While I don’t want to discourage you, I just want you to know that lenders will be looking for equity.

You also need to get a hold of the financial statements for the business. The current owner is probably going to say that he does not have any, but I am certain that at least he files tax returns. Grossing $250,000 is nice, but that is not enough to tell if the business is making money or more importantly if there is cash flow there to service the debt.

At the very least, you should know the following:

1- The $250,000 must be verified. The business did not gross $250,000 because the current owner said so.

2- You need to know how much of those $250,000 were for the parts that were installed. That will be what is called “Cost of Goods Sold” and deducting it from the sales figure gives you the gross margin.

3- You need to add up all of the expenses such as {rent, insurance, wages including your own, taxes & licenses, utilities, etc}

4- If there is a lease in place and when does it expires.

Make sure that you go over every possible expense that you can think off specially if the financial information that you get is of questionable quality. Knowing all of that information should make it less difficult for you to shop around. But I do not want to lie to you, even if there is good cash flow, finding someone to lend 100% without tangible collateral is going to be next to impossible.

Posted by: Rick Dec 15 2004, 08:02 AM

As a follow on to Admin's post, be sure to get an aged listing of receivables and payables particularily if you are planning to assume the liabilities of the company.

Also, you say that you can 'turn the company around'. Does this imply that the business is presently not profitable or has seen years of decreased profitability? In this case, most reputable lenders would be unlikely to provide 'bail out' financing unless you can present a definitive plan on how you will turn the company around.

Check on your state & federal small business programs, often there is money that you can access, whether as a grant or loan. However, in almost all cases, you will be required to show your committment to the business by putting in a portion of your own money (generally 20% equity at a minimum).

Best of luck,

Posted by: Commercial Lender Dec 15 2004, 09:48 PM
2nd Admin and Rick's posts!

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