Buying a Business


In most cases, the lender will want the buyer to have experience in the business they are purchasing, and perhaps prior business ownership. Lender may want to collateralize your house or other assets as the business is intangible, therefore difficult to resale in case of default. The lender looks beyond the buyer’s credit score. Furthermore, the business itself has to cash flow with a debt service coverage ratio of greater than 1.2x. Ask me to explain.

It is difficult to obtain business financing by conventional means, especially if the buyer does not have experience in the industry. If the buyer has experience, the ability to finance is very probable.

Fortunately there is the SBA (Small Business Administration), a government insured loan. For businesses, the SBA has 7(a) program which will allow financing up to 80% to 90% of the purchase price, and may provide additional funding for equipment, build-out, and even working capital so the business can get up to speed without running out of money. SBA does not lend on business start-ups.

I work with some great Business lenders. Call me to discuss.