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Brian Robison
09-08-2009, 1:45 PM
Hi folks, any advice on small business loans?

Garrett Nors
09-08-2009, 2:48 PM
How big of a loan? What's it for?

Dave Russell Smith
09-08-2009, 2:49 PM
Steer clean unless you can afford the extra payments in this depressed market, or if you have a good long contract to work on that will cover you

Brian Robison
09-08-2009, 2:50 PM
It would be to buy an established sign business.
Loan amount around 60K.

Garrett Nors
09-08-2009, 2:51 PM
How's your business plan?

Brian Robison
09-08-2009, 2:55 PM
Haven't done one yet.
Unless "sell stuff, make money" works :)

Dan Hintz
09-08-2009, 3:15 PM
You should at least make one for yourself... putting it in writing makes it a bit more difficult to fool yourself. A $60k investment is nothing to slouch at, so make sure it will pay for itself within a reasonable period of time, particularly in the current market.

Dave Wagner
09-08-2009, 3:30 PM
Also, make sure you check their books, records, sales, etc....it is tough is this market to get any types of loans, they need to see everything!

Sam Yerardi
09-08-2009, 3:32 PM
A bank or lending institution will more than likely want to see a business plan before they'll give you the money.

Bob Savage
09-08-2009, 3:45 PM
Haven't done one yet.
Unless "sell stuff, make money" works :)

I had that plan for about a week. I've decided to take this stuff on as a hobby and keep doing what feeds my family until I have a better plan.

Mike Null
09-08-2009, 5:19 PM
Brian

Based on our previous discussion I think you should talk to your banker for advice.

Wayne Sparkman
09-08-2009, 6:26 PM
Having been in the sign business years ago, I'd have to ask, "What are you buying with that $60k?" I assume you have some years of background in this line of work, existing skills and sales ability.

If you are buying existing tools and inventory that are easily worth in excess of $60k, then that's one thing.

But if you are paying for any valuation of the existing company's customer list, then I would be very skeptical. Sales in that business are built on personal contact and trust.

Would you be incurring any of the current owner's existing debt? What would that total? What other liabilities? Are there any existing liens, employee liabilities, unpaid taxes, or lawsuits outstanding (property damage, failure to complete work, etc.)? Can you secure clear and adequate legal insulation against all such burdens?

That business plan, which every bank will require for any small business loan, should include a competent picture of the current situation in your area and the prospect for future sales. An alternate idea: say you took the same $60k and set up shop on your own. Would you fare better than if you bought this company?

Also, would the current owners sign a non-compete agreement? Otherwise, they could take your $60k, re-tool, and set up shop down the road and probably keep most of the customers, to boot.

Rodne Gold
09-09-2009, 3:28 AM
I think it is a poor purchase if you dont already have a comprehensive business plan and havent done due diligence. Why is the business being sold anyway?

Mike Null
09-09-2009, 6:19 AM
Since I have had the chance to discuss this business with Brian I would jump at it if I had the chance. It is established and the owners want to retire.

It also represents a great opportunity to merge his existing business and equipment into an entity that will be greater than the sum of it's parts.

Brian Robison
09-09-2009, 8:03 AM
Do you think it's a good idea to talk to the bank and see what they would like before I just walk in with a business plan?

Mike Null
09-09-2009, 9:51 AM
I would do that.

Scott Challoner
09-09-2009, 9:57 AM
Nashville has a SCORE chapter as well. They should be able to give you advice on writing a business plan. There are services that will write them for you in some areas but the cost is a few $k. There is software that will do it for you too. Just plug in numbers and it spits out a plan.

Jerry Hay
09-09-2009, 5:33 PM
Look into a small business association loan. The bank should be able to point you in your local SBA direction. Not only will they help you with your loan they have people who will help you with your business plan. They work close with the banks too and know whay they want to make the loans. I bet a quick search online and you will find your local chapter and the service should be free.

Phil Thien
09-09-2009, 8:24 PM
Most of the small businesses I know have told me their borrowing options have mostly dried-up.

While I would still explore that avenue, I'd also approach the seller about whether they'd be willing to finance the deal.

Bob Davis
09-09-2009, 10:36 PM
There are a lot of variables here, but in general I think buying an established business is a much better option than trying to start fresh.
You've got earnings history, established customers and systems, full knowledge of liabilities, equipment and stock.
The key is to do your homework, don't accept anything at face value and to be pessimistic about every aspect. Work on turnover being reduced (the previous owner with his experience and contacts will be better at it than you are at present) and costs going up (the previous etc...). There are always about a bijillion details to try to take into account. Ignore the little things and try to get the big things right. If you can't make a business case to a financier you shouldn't be trying to get finance.
If you can still make the business case, go for it. Over time you will be able to put your own stamp on it and from there your success or failure will be determined by your skill and effort, and a little bit of luck.

Mike Null
09-10-2009, 5:35 AM
Unless things have changed it is the bank who makes the SBA loan. The SBA guarantees the loan for the bank but the transaction is a bank transaction.

Not all banks participate in this program.

James Stokes
09-10-2009, 6:30 AM
one thing about an sba loan there is no defaulting on the loan. They are like the IRS.

Darren Null
09-10-2009, 8:17 AM
Is there not some sort of business development grant available? I'd explore that option first, I think.

Personally speaking, the further myself and banks stay apart, the happier I am. I don't even have a bank account now, and my money has never gone further....

pete hagan
09-10-2009, 8:20 AM
I have a great banker that has been working with me for 15 years. The first loan required the type of investigation and research worthy of a doctoral dissertation. That business plan made me look at EVERY aspect of the business which was the best thing I did. Unfortunately I did not take into consideration terrorists blowing up NY with planes but the bank’s loan was paid off by then and the banker stuck with me through very thin times. Now I can ask for modest amounts with a phone call but that’s my hard work.

Picking up an established business can be very lucrative IF you have the protection built in as everyone here suggests. Non-compete clause, possible current owner staying on for a period of time to train you in how they have made the business work THEIR WAY, introduction to current recurring clients, etc… The benefit is an operation with cash flow from day one. The unknown is whether this business is on its way down from the top of the hill or still a rising star. It takes time to figure this out and anything can be configured in a purchase contract to give you time for transition to new ownership. A friend of mine actually worked for the former owner of a machine shop for a year before buying it from owner and his family. It created a very vested interest in the new owner’s success for the selling party plus after a year the selling owner decided to finance part of the deal.

Without a solid business plan I would not buy any business or start up a new business. It’s like jumping in a car in Romania and going form one end of the country to the opposite side….without a map! (Never been to Romania and no insult intended). Do your homework and best of luck (means work hard!). Keep us posted we love to hear success stories.:)

Dan Hintz
09-10-2009, 10:17 AM
one thing about an sba loan there is no defaulting on the loan. They are like the IRS.
Huh? The loan is through the bank, not the SBA, and the SBA is guaranteeing the loan if you do default. The SBA merely acts as a conduit to the proper channels in the bank loan department, as well as making the bank feel comfortable about the loan (the bank gets their money regardless of what happens to you).

James Stokes
09-10-2009, 4:10 PM
The loan is through the bank but if you default on it the SBA will still require you to pay that loan. You can not even get rid of it through bankruptcy.

Steve Clarkson
09-10-2009, 4:27 PM
That's not true.

Dan Hintz
09-10-2009, 5:19 PM
Ah, it appears we are both correct, James... it looks like the loan amount matters (and possibly the timing, too, as mine was years back). My loan (a credit line) was for a measly $10k, and I was required to sign no personal guarantee other than linking in my bank account (which, in hindsight, seems like a raw deal for them should I decide to abscond with all of the money). For larger loans (and therefore those with personal guarantees), the SBA is allowed (though not required) to chase down the debtor for recovery of whatever portion the agency guaranteed. The bank gets the guaranteed portion from the government, and it's up to the bank to go after everything else.

Brian Robison
10-02-2009, 11:31 AM
OK, next question.
For 60K or so, what would be the terms? How many years to pay it back?

Dan Hintz
10-02-2009, 12:11 PM
Depends (you like that answer?). Many loans are for 24-60 months (usually on the shorter end of that scale), but the rates are rarely easy to swallow. You can usually get the loan as a line of credit (as I did), so you're not paying interest on what you're not using.

Steve Clarkson
10-02-2009, 12:18 PM
Brian,

Try to go to a small community bank and see if they will do it without the SBA......it'll be alot cheaper. Likely, you will be able to get a 5 or 7 year loan at Prime + 2%. Find an online calculator and you can plug in months & interest rate and it will spit out a monthly payment.

Stephen Beckham
10-02-2009, 12:18 PM
Brian,

Don't want to sound discouraging - but I was just looking at buying a turnkey business to add to the mini-mall. It would have given me a building to call my own and another aspect to put in a different corner. The bank basically told me that right now I'll get 1/10th the credit of my collateral. So I've got to have a little over $650,000 in collateral or stock in order to borrow the $65K to buy a working business. WTH????

At any rate, I'm going to stick it out a bit longer and let this one pay itself off before I go jumping into another venture... I'm still growing in size and in sales - I'll just wait till the walls bulge so much that I have to do something....

Good luck with your request.

Oh, did I mention that if I wanted $150,000 francise fee for a Subway, they'd have no problem working with me for a loan..?!?!?!

Brian Robison
10-02-2009, 3:05 PM
Hmm, small subway, BIG LASER & SIGN SHOP. Guess I'd better modify the business plan.

Tim Bateson
10-02-2009, 7:59 PM
BIG difference in Business Plans. If one fails your setting a lot of equipment and inventory. If the other fails, You still have equipment and inventory, but... you can eat like a king! :rolleyes: :D