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Thread: Bridge aquisition LBO loan

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    Default Bridge aquisition LBO loan

    So let me start by saying I am brand new to the forum. I looked through some but you have a few hundred thousand posts in this place and each has a million responses. LOL. So I did not search really deep to see if this was addressed already.

    I have come to the conclusion that banks do not do micro loans. And thus far everyone I go to says they don't know what a bridge loan is and don't know what I'm talking about doing a leverage buy out. So I am hoping for some advice on how to accomplish this.

    I am buying an established business of 8 years. Profitable. But not over the 100k annual revenue mark (another thing banks don't seem to do) because it is run entirely word of mouth. The owner never markets, never uses the social media, never even takes pictures for the website. Its literally a word of mouth business that he uses to get a little easy money in the door. But he's bored with it, He is looking to let it go. So I want to buy it. Unfortunately, it landed in my lap and I had not the time to prepare for the purchase. So the best way for me to acquire it is leverage buy out. However I'm only looking for $27,500-$30,000. I don't have a credit card that deep (I hate credit cards), and the house I can only get a portion of that, and I didn't/don't have time to save it up. So the easiest way with the limited time I have is for a bridge loan. If I can get a bridge for a one month turn around, then I can gain possession of the assets of the LLC and I can leverage them in to a company loan and pay off the bridge in a matter of a couple weeks, and then let the company pay off the asset based collateral loan.

    Sounds easy enough right? No It really isn't. No bank will go that low in terms of loan amount, and they are treating it like a business loan. "how long have you been in business". I buying it so I haven't. "How long have you managed the company", Well I'm buying it so I haven't. I have asked a couple private investors but they don't get the idea. They think I'm saying Ill pay it back slowly. They want to know monthly payment conditions and credit and all that. I try and explain its a 4 week loan. One payment, full payoff plus agreed interest, and it is as if I'm speaking in tongues.

    The company assets are plenty to cover and if they weren't the company credit card limit would. It literally is like who wants to make a couple grand in a month, and everyone looks at me like I have two heads, and up to something shady.

    I am hoping someone in here has either accomplished this or knows someone who does this kind of investing. Honestly, if someone gets me (I think I can close the sale at $27,500) and as soon as I have the LL in my name, I will return their 27.5 with 2k in interest. But I have to gain possession of the assets to do it.

    Any ideas that could be thrown my way I would be forever indebted. I am truly amazed at how few people even grasp the concept. Especially in financial sector. How can you be a business loan agent that doesn't know what a bridge/ swing loan is?

    I will never understand why a business acquisition loan cant be like a home loan. I don't own the home, But they give me a loan based on the value of said home I purchasING, why do they not have business acquisition funding out there to buy a company with the company as the collateral yet? You know how much easier it would be to get people owning business? And becoming successful? That I think is my target business. One day if the world still exists to own a financial company that will help you buy a business using the company assets as collateral. I digress.

    Thank you in advanced for any information. And have a great and prosperous day.

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    To make things clear, what you're looking for is a purchase loan rather than a bridge loan.

    With that cleared up, the biggest issue you have is that you're buying a business's assets (I'm assuming the seller is operating as a sole proprietor). Assets are not the business and, more often than not, will only liquidate at fire sale prices. You are the business and your character, capability, and capacity will be put to the test.

    Let me ask these questions then:
    1) What type of business is it?
    2) How much of the purchase price can be allocated to physical assets, inventory, goodwill?
    3) How was the selling price determined?
    4) How much do you have for a down payment?
    5) Is the seller willing to carry the financing?
    6) Will this become your full time "job" or just a moonlight business?
    Brad Miedema
    Fulcrum Saw & Tool

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    One solution could be that current owners borrow money through the company to pay themselves a dividend equal to the price you agree to and then sell you the company, with the liability, for $1?
    SmallBizOrg.com - Everything you need to organize your business
    Free mini MBA for small business owners

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    Quote Originally Posted by SmallBizOrg View Post
    One solution could be that current owners borrow money through the company to pay themselves a dividend equal to the price you agree to and then sell you the company, with the liability, for $1?
    I can see this working if the company is a C-corp and there is no personal guarantee on the loan.

    I'm really curious as to what type of business this is where it can apparently generate enough profit to pay off $30Kish in debt in one month.
    Brad Miedema
    Fulcrum Saw & Tool

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