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Old 03-11-2011, 01:47 PM   #1
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Small Business Loans

I have an opportunity to take over a business that does ~80-130k a year in profit, but I've just taken myself out of debt and paid off something that went to collections.

I need 90k to "buy" the business, but I don't know where to look, or for that matter even if I will get approved for a loan.

How do small business loans work? Do I need my own capital, or will banks fork over the money if the business plan is good.
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Old 03-11-2011, 02:07 PM   #2
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bank will grade you on the 5 c's of credit

Character - that is you! what kind of background you have (education/work/biz exp etc..)
Collateral - this is like inventory at your biz ( quicker to turnover the better it is )
Capital - how much of your own funds you got invested? Are you as involved as the bank?
Conditions - this is like debt covenants and stuff ( dont think it applies to small biz - i'm not sure )
Capacity - cashflow of biz. do you have enough cash flow to pay your obligations.


answer those yourself . and present your case to the bank using that info. you will be in their good books.
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Old 03-11-2011, 02:50 PM   #3
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Have you gotten a full audit of the business done independently?

It's very, very easy for a small business to make themselves look more profitable than they actually are (and I have seen this done many, many times to lure in prospective buyers). The bank will probably want this any how, but I wouldn't put a cent into it until it was done if I were you. Also a credit check and an audit of debts you will inherit with the company.

Selling a business for 90K that does more than that in a single year in profit strikes me as a bit questionable but I imagine it depends hugely on the industry.

Here's some info on the Canadian small business financing program: http://www.ic.gc.ca/eic/site/csbfp-pfpec.nsf/eng/Home

It's more for improvements on business than aquisition of business though.
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Old 03-11-2011, 03:37 PM   #4
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Its not a sale persay more like a takeover for someone who wanys to keep his intrests in that franchisee while taking a better oppurtunity in the company. The source is trusted too.
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Old 03-11-2011, 05:06 PM   #5
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Buying a business for 1x profits means that there's something wrong with the business. NO ONE sells their business for 1x profit unless there's something that's going to happen, or has happened that would materially affect the business.

Knowing you, you're going to ignore my advice and go ahead and try to get the money somehow. Don't say I didn't warn you cause you're gonna get fucked up the ass hard.
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Old 03-12-2011, 01:41 AM   #6
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The reason isn't sketchy, its actually my bro norm.

Its legit, its just a franchise issue because he's taking a better position within the company on the other side of the country.
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Old 03-12-2011, 02:32 PM   #7
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Quote:
Originally Posted by MajinHurricane View Post
The reason isn't sketchy, its actually my bro norm.

Its legit, its just a franchise issue because he's taking a better position within the company on the other side of the country.
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Because your brothers have such a good record of looking out for your best interests right?

Maybe this is the good brother. Maybe he's being nice to you by selling for 1x profit. Maybe he really sucks at business. Maybe this... maybe that.

I can tell you for certain that 1x profit is sketch.
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Old 03-12-2011, 07:58 PM   #8
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Dafonz if you're not going to contribute don't post
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Old 03-13-2011, 03:34 AM   #9
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No he's right with his first comment.
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Old 03-13-2011, 09:31 AM   #10
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Sorry I was getting at that last comment
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Old 03-13-2011, 12:43 PM   #11
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Dafonz if you're not going to contribute don't post
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I know his history a lot better than you do so actually yah I am contributing and my advice is sound. Piss off.
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