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Can you use a asset lender for the DP if the owner finances the purchase?

Is it possible to do a double close to purchase a business? In other words the owner will finance with 50 per cent down. You get a asset lender to loan the 50 percent against the business assets. The owner gets his 50 per cent and the asset lender loans this amount against the business assets. Would the business owner allow the asset lender to have a first(senior) position after he receives the 50 percent down payment? Or will the owner maintain the senior position and the asset lender will have to take the second lien?

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We are financial consultants to a group of investors whom we have their consent to manage their funds which is in our custody for cooperation in joint venture business investments.

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Jun 6, 2017
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Biz2Credit LLC
New York County, NY

Biz2Credit ( funds a large no. of business acquisition deals. Lender will always take the 1st lien position and you will need to come up with 10% down payment at the least to get started as lenders will not a deal where rest of the money comes from seller note.

Oct 18, 2010
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Yea, that's what I thought. In the 80's we often acquired very large loans where the seller would take back a second but it was after he/she had acquired the bulk of the purchase price from our lender - 70 or 80 per cent. The sellers second would be 20 per cent or so on extremely favorable terms to us.. Even though I have seen the method I described floating around for awhile I just couldn't get it straight in my head why the seller would give up his best collateral to an asset lender and take a subordinated position on what is left. Especially not on as "small " a DP as 50 per cent. Now believe me, if you have 80 per cent down a deal can be done very quickly. Most businesses that are for sale have at least 20 per cent water in them and the seller knows it.

Oct 18, 2010
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The BAF Group LLC

The institutional Lender will always insist on being in first position for a lien. Even private Lenders will want the same. if the Seller is taking as much as 50% in a note, I would not be surprised if he would insist on that as well. Getting in for nothing is almost impossible, particularly in these economic times.

The old "nothing down" era is effectively over. And remember that the guy that wrote the book on the subject went bankrupt.

Even if you did land a miracle, then you have two notes, equalling 100% of the value of the property. Unless you got loans for next to nothing, the P&I would kill the mortal man! (Or woman.) If you are buying an investment property, how far below market would the property need to be sold, in order to give you the cash flow to pay off both notes? And if it is that far under market, what is wrong with the deal?

If you are going to do this deal, I would look for a partner. Two lenders are just not reasonable, in the vast majority of the cases.

Oct 18, 2010

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