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Traditional Financing
Since the purchase price of most businesses includes some form of goodwill, it is very difficult to secure traditional bank financing. Goodwill, put simply, is the difference between the value of a company's tangible assets and its selling price. And while you may be able to finance a portion of a company's tangible assets (furniture, equipment, etc.), very few commercial lenders will loan money against goodwill.
The existence of goodwill, however, may not be the only problem when it comes to borrowing money to buy a business. Far too many business owners fail to keep good financial records. This is most often the case with businesses that deal with a lot of cash, such as restaurants, car washes and auto repair shops. Without good records, it is very difficult to verify a company's income. |
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Without income verification, the valuation of a business involves substantial guess work. Even though cash intensive businesses are difficult to value, there never seems to be a shortage of potential buyers. But with a lack of clean records, these buyers must rely upon their personal savings and lines of credit, or friends and family, to finance their purchases. In some cases, seller financing is available, but usually in limited amounts and for a limited period of time. Fortunately, most business owners are honest people who keep clean books and records. And, for the right buyers, the U.S. Government's SBA Program is a great source of financing... goodwill and all!
SBA Financing
Obtaining an SBA (Small Business Administration) loan is a great way to acquire a business. In fact, according to Forbes Small Business (October 2003), the SBA has distributed more than $230 billion among some 1.3 million small businesses since its inception in 1953. Former clients include Hewlett-Packard, Callaway Golf, Outback Steakhouse and Fed Ex. D'Souza & Associates works closely with several SBA lenders, including Wachovia Bank, and will gladly provide introductions. For more information on SBA financing, contact Brian D'Souza at 954-254-2755, or send an email to brian@businessbrokersinflorida.com
Private Investors
In select situations, D'Souza & Associates will introduce its clients to private investors, also known as venture capitalists or angel investors. The circumstances in which such introductions occur depend on the size of the deal, the quality of the company's business plan, and the management team's experience. To discuss private investor financing, contact Brian D'Souza, by phone or email at brian@businessbrokersinflorida.com
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