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Is a $1000000 down payment of my own money enough in 2010 to buy a $5000000 real business?

If I find a real business with verifiable assets and long term, acceptable cash flows that is at least ten years old, is 1000000$ of my own money an acceptable down payment to obtain a bank loan of 5000000$ on this business? Or is the current banking crisis so bad that a much larger (40 %) down payment is required? Again, I am talking about a real business that should stand on it's own. Not something that has two ten year old pickups, two computers, and unlimited intellectual capital and blue sky for 5000000$

Thanks in Advance

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Answers (6)
Dr. Vasquez Reynolds
Easy Lons
Los Angeles County, CA

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14 hours ago
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Biz2Credit LLC
New York County, NY


Biz2Credit ( can help you in getting business financing for the business you plan to acquire. Normally 20% down payment is fine until the industry is a high risk category. Ideally if around 5% can come in as seller financing getting a 75% LTV is doable.

Register on Biz2Credit for free and chose the case manager option to help you walk through the process.

Oct 25, 2010
Sigrid Caroline Schroder, JD
Sulgrave Strategies LLC
Strategic planning, development, risk assessment, mediation and turnaround

It really also depends upon your assets, liquidity and any pre-existing liabilities. Even if a lender would lend to you on that basis, you should run some serious scenarios reviewing hypothetical situations such as loss of a key customer or major contracts and even loss of major suppliers which could back you into a corner on pricing or delivery times. It's not so much the current banking crisis and credit crunch as it is the very rough economics for small businesses as a class which is the current problem. Consider how much emergency cash you would have on hand should there be a real double dip recession or unexpected contingencies, including weather and war, affecting supply lines, fuel prices, consumer confidence or whatever else would affect not just your business directly but that of your customers and vendors and the entire supply chain. Every business and every environment hides surprises. Consider how much free cash flow you might need. Don't overlook intellectual property contingencies even in an old line manufacturing business. Consider also potential changes in your personal and family life which might require additional cash and force you to sell assets or liquidate holdings. Make sure that you leave yourself an adequate cushion regardless of a lender's position.

Oct 25, 2010
Kathryne Pusch
ConsultKAP Inc./Business Brokers Network

This will be tough in the current lending environment, as you will be stretching the limits of most lending programs to buy a $6 Mill biz with your $ 1 Mill + a $5 Mill loan.
There is a lot of "ground" between your 2 computers + 2 Pick ups and a $ 6 Mill deal, though. You can definitely find a financeable deal for 20-25% down in that in between range where a greater percentage of businesses will land. I suggest you find a professional business broker with some years of experience to help. If you need a referral in your area, let me know. Best, KAP

Oct 25, 2010
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I am looking for business partner such as yourself and you have a very important question. There is Venue in Michigan off the Detroit River that you maybe interest in. I will let you talk with the realitor if you inquire further information

Oct 20, 2010
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The BAF Group LLC

Jack, it depends on the financial, verifiable trends in the business, your personal experience relative to the business you want to buy, and the security that is offered for the amount to be borrowed. SBA's 7a loan program has just been increased. We are doing a $12 million refinance with 25% down, but there are some scenarios that make this one more difficult to finance. If you want to call me and give me some additional details, I can try to help you through our system. We have had considerable success, particularly in the current market. Don Barrick, (410) 715-0700.

Oct 20, 2010