Funding for purchasing an existing business

[Bgraham]

My fiancé and I have worked at a bakery that is currently owned by her aunt for the past 5 years. The bakery has been in business a total of 9 years this upcoming August. It has a well established name and customer base in our town. She is in her late 60's and is ready to retire. She has offered to sell us the business which doesn't include the building (it's a lease) for $25,000. What are the first steps/documents I need to seek funding? **Also the business brings in roughly $150,000 a year total sales.

[rshughes]

For only $25K you'll probably be seeking a home equity line of credit, or an unsecured credit line like a credit card (higher interest rate). Talk to your personal bank, or the bank being used by the bakery -- they will tell you what financing might be best for your situation, and what documents you will need.

[DeniseTaylor]

Something to keep in mind that might help.

You might consider some creative financing as well. Perhaps give the owner a sizable down and then work out an attractive payment plan that rewards her for taking the risk. Since most savings are offering such low returns a time-payment with decent interest might pique her interest. She may not go for it, though unless there's collateral involved.

Just a thought for an alternative plan.

Good luck!

[Paul]

You should gather up all available historic financial information, tax returns etc With a 9 year history of steady profitability you may be able to get a basic business loan. The amount of $ 25,000 shouldn’t be to difficult assuming that the business has been consistently profitable.

I would first go to the bank that the bakery has been using. They will obviously have the history of deposits and checks written and the established relationship may give you a little edge.

[phanio]

No bank or legitimate lender will waste their time on a loan that small - not worth their time. Sorry.
But, other gave some very good ideas - go around town to local banks and credit unions and apply for all the personal loans or lines of credit that you can get (this is how I funded my first business). Many banks and credit unions offer up to $10,000 personal lines of credit - two or three of these and you are there (took me getting four separate ones to get the money I needed). And, doing it from your personal side will make the approval easier by not having to provide all the business's document and information.

Or, seek out a micro loan in your area or state. These business loans can offer up to $35,000 - more than enough for you. The SBA has a partial list and we have a search function on our site that offers more lenders. But, might be a good way to get all or part of the funding you need. Plus, micro loans are for those business owners who cannot get funding anywhere else.

[JayPack]

No bank or legitimate lender will waste their time on a loan that small - not worth their time. Sorry.


That is simply not true. While you won't get an amazing low rate that banks will offer, there are many legitimate lenders that will most definitely lend that amount of money, especially given the fact that the business pulls in $150,000 a year and he may be only asking for $25,000; that is not such a large request. There should be no issue getting him approved for such a loan.

Source: I am a loan officer that helps small businesses get approved for funding. I receive some loan requests (not many) that are under $40,000. If their monthly profits of the last six months (let alone nine years!) show that they have enough consistent capital to back up such a loan, they DO get approved.

[Specialty Business Checks]

If your using quickbooks, authorize.net, paypal, Facebook, twitter and some others. You could apply for a loan through Kabbage (https://www.kabbage.com/?refid=krpd1ed8477). Easy to apply and instant approval. Their requirements are through authorize.net and etc.. for credit card payments. They dont do cash, but its cheap and easier to get a loan. FYI..... What ever the loan in. You'll have 6 mths to pay it back in installments that would be drafted from your business checking account. Good luck