Loans

[Gaulkin]

Who here has successfully obtained a loan from the bank to buy an established business?

[Gaulkin]

bump bump bump

[Gaulkin]

I guess no one has but does anyone have knowledge about it?

[CIsaac]

Yeah, just depends on the state but it is a lengthy process. Might have to be you, a business banker, the former owner, etc working together. You will need to have all the docs showing how that business has previously performed and if there are any other loans out there that the previous owner had, the bank will want to take a look at all the paperwork. Reason? The previous owner might have used "all business assets" as collateral.

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[FUN-GUYZ!]

Good answer CIssac. I am currently a banker for one of the largest bank in the country. The business banker will look at your personal credit (most banks require a business to be established atleast 2-3 years before extending credit in the business' name), and they will also look at previous earnings from the buisness you are buying.

Those are the two big items they will look at, here are some other's that they take into consideration;

-Your managerial experience (industry experience, not Burger King manager experience)
-The businesses credit rating (D&B)
-Loans outstanding in the businesses name
-They want to know if the business operates in a leased building, or is it owned.

Many times, the bank may ask for a personal guarantee, usually in the form of liquid assets (cash, CD's, etc) that can be "held" by the lender as collateral. Or they may ask for the new owner to use their home (equity) for collateral.

Hope that helps.

Jason

[warrensway]

might as well just use prosper or a site such as that if the bank wont give you money

[Gaulkin]

Well heres the deal, when i graduate college with a finance degree i want to buy a local garbage company. The median price is about 500k and high is 1 million, for the sake of it i can put up collateral of 10% against the 1 million. I will have no debt, no loans, and no student loans. I currently have perfect credit but my line is small and its a secure line. What would you say is the best thing for me to do to prepare before going to the bank?