I have been a baker for 20 years. I have been running this bakery for over 5 years. The owner really wants out and wants me to buy it. i am working on a business plan, it is all turnkey, i run it now, and we have good sale history/projections(600-650k gross 100k net)I can come up with maybe 1-3% of the down. I just bought a house, so savings are gone.My credit score is 720. So do i have a chance at 100% financing. Is there such a thing? What options are there? Thanks in advance
#1. "RE: So do i have a chance,or wasting time effort" In response to Reply # 0
Well, having a rich uncle might be nice, but in reality, they are few and far between. My own rich uncle is a great mentor, but I would never ask him for money. Why? I hate doing business with family. Ish!
I liked the response about the SBA, but go farther. Check out their website and look at the listings of venture capitalists in your area. Look at the tips there for getting "hooked up" and see if anyone has an interest in sporting you on this.
At 720, your credit score is good enough to qualify you for most small business loans-the caveat is that they want a down payment. My brick and mortar required a 50% down payment. Yep, 50%. And I was at 720 and it was during boom years, not bust.
BUT... Don't say never. First of all, if you don't bother to ask, it will never happen. Is the seller considering financing you? If it's clearing 100 grand, then he should consider it. He, better than anyone else, understands the expenses and the overhead. He is therefore, the very best option for helping you get it done.
Why would he not want to help you, if he is so anxious to sell? My questions would lie in "what don't you know yet" about this business, or about how he's been doing business. If the seller is retiring and requires the cash out now, then it's his problem and should remain his problem, don't let him talk you into it.
But, if it's really turnkey, has a profit and he doesn't need the money for 4-7 years, I think he should be willing to finance you based on your history with him. Be sure to include training time of at least 30 days so he can make sure you fully understand all the paperwork, vendors terms, cash flow and more. You may be a great baker (and I'm a pastry freak!!) but you may not yet be a good manager; however with 20 years, I'd say you probably know your stuff.
He is looking after his interests, which is getting out and getting the most he can for his business under the circumstances. Is that YOUR interest? Is it fair to you, especially in this economy, to take it over now? Is the price fair? Have you looked at other bakeries in the area and beyond to see what they are selling for? Check out several websites that list commercial businesses (such as "businessesforsale.com"-no I have no interest in them, just found them on a search...) Be sure to check the decline of sales for the past several years-you need to be fully aware of how the economy might impact you today and tomorrow.
One final note...Does it include the real estate or is it a leased location? You should be very aware of the terms of any lease or real estate agreement, so the final advice today is get an attorney involved. I know you probably don't want to, but if you don't you'll surely kick yourself later on.
#2. "RE: So do i have a chance,or wasting time effort" In response to Reply # 0
Yes, I think you have a chance. With the Small Business Jobs Act, Community Banks will have more money at cheaper rates to lend. So go to a Community Bank when you?re ready to apply. The act also waves fees on most SBA loans and extends the payment terms, which would lower the cost and payment for you. Are you buying a building or are you buying mostly ?good will?? Banks are more likely to lend on brick and mortar than ?good will?. If you have a Small Business Development Center or SCORE in your area, I would recommend you ask them for assistance. These are SBA sponsored organizations that offer free assistance to small businesses. They can help you with your financial projections, business plan and how to position your plan to best qualify for the loan.
Good Luck and congratulations on the great credit score!