The last couple of years have seen renewed interest in people buying and expanding bar, restaurant, and liquor store operations. However, financing the deal continues to be a major roadblock for many buyers wishing to pursue the American Dream of owning their own business. Sure, the banks have lots of money to lend, but getting approval from underwriting is another story. Here are some examples of roadblocks and the solutions used to get the deal done.
Problem #1: The bank wants 20% down, but the buyer only has 10%.
Solution: Seller carryback. Under this scenario, the seller carries back 10% of the purchase price in the form of a secondary note. Many banks and the Small Business Administration (SBA) will view this as a form of down payment as long as the other requirements are met. Read More
Recently we ran into a situation in which we had a qualified buyer to purchase a distressed business which was about to close down due to extreme financial stress on the business. The business is owned by 4 partners with no real management experience in the restaurant field. They were behind on the bank payments, SBA payments, Federal withholding, Real Estate Taxes, Utilities, just about everybody.
Employees were dropping like flies and sales were down by one half. These guys are in real trouble. The good news is the buyer already owned 4 successful restaurants and was looking to purchase another. The bad news is that because he had recently just completed a $1,000,000 deal through us, the bank wanted to wait another 6 months before they were going to lend him more money for another purchase. Read More