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Buying an existing business, how much value from the business will be collateral.

Hello, I have been looking into buying or starting a business. I have about $100,000 equity in my home, $20,000 cash and $30,000 in a retirement account.

If I were to go to a bank an seek a SBA loan to purchase an existing business, how much collateral from the existing business could be used?

With my money situation how much of a business should I be looking to buy?

Thanks guys!

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Answers (4)
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Hello everyone here, there is a firm that give Loans to both individuals, organizations and anyone in need of an emergency loan at 2% Interest Rate. I have being using them for over a year plus now including my friends and other individuals and they are indeed reliable, reach Jon Billy email at (jonfunding@gmail.com) they can guide and advice you on every step involved. You can give them a Try if you wish but i assure of success in every transaction done with them. Thank you

Aug 8, 2016
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The BAF Group LLC
MD

Why not start by taking a look at our blog. It is set up really for people exactly like you, giving guidance to how, or even with to start or buy a business. There are 36 posts altogether. Start at: http://combrokerbusiness.wordpress.com/2012/01/04/should-you-even-think-of-owning-your-own-business/

Sep 23, 2014
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Comcast
B2B Sales
Arapahoe County, CO

Thank you for answering back. I honestly dont know what I want to do. I am very open to a number of different ideas. I just dont even know where to start lol.

Sep 23, 2014
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The BAF Group LLC
MD

Ross, unfortunately it is not that simple. First and foremost, SBA is going to look for perhaps as much is 30% down on any business, from you. In most cases, the seller can provide you with a secondary note so that, for example if you have 15% of the purchase price, it you get the seller to provide you with a note for another 15%. That allows you to take the combination of 30% to the SBA. There other ways around this issue, but this is the most common.

Having $100,000 of equity in your home doesn't do you much good anymore, because what lenders are looking for is that cash injection that I just described. And banks will not allow you to use your equity in your home, if you tell them it is for the purchase of a business. The retirement account? You can use it, but I would really counsel against it.

And as for equity in the business? Unless you are purchasing real estate that conveys with the business, or you have a tremendous amount of equipment in an industry such as manufacturing, there is very little to any collateral to be obtained from an existing business. Automotive businesses and restaurants, for example have virtually no value in any of the equipment that are brought to the table. Goodwill is essentially what you are purchasing, and that of course has no tangible value which can be equated to collateral.

Without knowing the exact business you are looking at, it is really difficult to provide you with anything that even hints of a positive response. It really is, to a large degree a case-by-case situation.

Sep 23, 2014

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