Need Advice, Buying Existing Business....

[Sales33]

Hi everyone, I recently joined here and have really enjoyed reading the threads; there’s a lot of really good insight and helpful advice… That being said, I am looking for some good insight / advice myself.

I am the Sales mgr. for a small company (4 employees currently; including the owner) that I’ve been with for about 8 years. We are a wholesaler of new and used commercial restaurant equipment. The current owner bought the company 8 years ago and hired me on at the same time. The first couple years were rough as we were not exactly sure what we were doing and made the typical mistakes. Since then, the company’s sales have improved steadily and become consistently profitable. About 3 years ago the owner started working part time (about 18 hours per week) and I handled anything & everything that arose as well as generating about 75% of the total sales.
The current owner and I do not get along very well and as time goes on, it seems to be getting worse. The plan all along was that I would buy the company from the current owner upon his retirement (he’s in his mid 60’s). Originally, we had discussed my buying the business from him over time. Of which, he would stay involved until it was paid for (7-10 years depending on growth). However, I’ve come the realization it would be best to buy it outright and not continue with the “partnership”.
I guess my question is, does anyone have any advice on where to look for financing? The tentative number for the business is 575k. After down payment, financing would be for about 500K. I’ve been told (by a customer) that an SBA loan is not a good way to go because the interest rate is higher. Is this true? I’ve already been approached by several clients, associates, etc. about a partnership or possible investment cap. I really think I would prefer to find an investor / institution that is not in the industry or someone who will be stopping frequently checking up on me etc.
Have any of you been in a similar predicament or known someone who has? Any financial investors / companies to avoid? Any and all input is appreciated.
Thanks For Your Time,
Mark

[rogercbryan]

Just a couple quick questions:
1- You have $75K as a down payment?
2- Do you have current financial records for the company?
3- Do you have any other assets that you can use as collateral (house or investments)?
4- If you use your $75K as a down payment will you have any other working capital to fund the company?
5- How is your credit
6- What is your annual income and the income of the company (you can PM this info if you do not want to make it public.
This would help me to give you better advice as to how to proceed.

[BusinessAdviser]

I'll just throw in my two cents about the SBA loan advice:

An SBA loan does have a higher interest rate, but for good reason. Basically, if you are unable to find a commercial lender, the SBA will come in and allow you to obtain the loan because they demand a premium on top of the typical lending rate, due to your higher risk (which is why you are unable to get the loan in the first place). Thus, you're clearly identified as a higher risk borrower, so you're going to have to pay a higher interest rate for the loan.

So the lesson is that you should go to the SBA as a last resort, after you have already been turned down by other lenders and have no other choice but to pay higher rates if you want the loan. Still, remember that there are plenty of other options out there, such as angels, for one.

Good luck.