Board Topic: Buying a franchise

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Buying a franchise

Posted by: Bred01 Apr 27 2003, 11:28 AM

I am interested in buying a Yogurt/Snack Franchise with an Asking price: $140,000 , Sales revenue: $240,000 and a Net profit: $68,180. The seller is willing to finance $50,000 at 8% over 3 years. How do I get a loan for the rest?

Posted by: loanuniverse Apr 28 2003, 02:07 PM

Bred:

The numbers at first glance look nice. I would encourage you to get some independent confirmation of the revenue and profitability of the business before you start the bidding process. I would also recommend that you read my valuation page to get an idea about how to find the value of a business.

Regarding your question… While it would be possible to arrange for financing in a way that you could borrow the missing $90,000 from a bank and use only debt for the purchase. Chances are that a serious lending institution would not want to lend if your equity is going to be $0. Most banks require that the debt to worth ratio does not exceed a certain multiple a common number is 6. This means that the maximum leverage in your situation would be $120,000. Please note that this does not mean that the bank where you end up requesting the loan will be comfortable with only $20,000 coming from your end

I would recommend that you talk to a lender in your area and ask him for a list of the information that he will need and most important advice as to how this purchase could be financed.

Hope this helps.

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