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Question regarding financing a business....

Just wondering...are there any lenders that would base lending off of the cash flow of the business you want to purchase, and not so much off of buyer? For a person with great credit, but lives with parents therfore not having any big assets to use as collateral, be out of luck when it comes to getting a large loan?? Interested in a biz that has asking price less than 100k and seller willing to finance 50% , with tax returns to prove my income as well as the businesses past income. Am I still screwed when it comes to obtaining a loan with no personal assets to secure it??

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The BAF Group LLC

There is no way of telling for certain, until and unless you make an application. Some may consider you, some may not. I would start with the Seller's own Bank, because they know the Business best.

Lenders are highly different in their approaches; however, they invariably look at the Business Cash Flow, The Borrower's Creditworthiness, his/her assets for security (if the Business does not have sifficient assets, itself,) the Borrower's experience in being able to satisfactorily manage the Business - there's a lot that goes into it! A good Business Plan is vital, in order to let the Bank know you are aware of the positive and negative aspects of the Business, and your projected ability to pay the note and survive.

Some Banks will not deal with some industries, at all. Most - not all, but most Banks will no longer lend on Motels, for example. Gas Stations are another taboo, with some Banks. And all of these things combine, to one degree or another, in order for the Bank to make a decision.

Remember one cardinal rule: Banks are not in the business to take risk! That was true before, in business lending; but it is even tougher now.

Apr 4, 2010