PDA

View Full Version : How much business loan can I get with this profile?



jake0910
05-26-2016, 06:42 PM
I’m interested in buying an existing business that’s already making positive cash flow, rather than starting from scratch. The business will be a multi-unit fast food franchise (think Jimmy Johns, Dunkin Donuts). I was hoping to get a loan for $2MM as I've found a business with an annual cash flow of $500k, and thought I could pay off the loan with the cash flow alone. However, I asked for opinions regarding my chances on other forums, and most have told me that it would be impossible since I don't have much collateral/assets. If that's the case, if I apply for an SBA (7a) loan, then how much can I realistically get with this profile?

Annual income: $85k

Collateral: $80k

Net worth: $600k

Down payment: 20%

Other: I currently have no other loans or debt, 740+ credit score, good financial history

Harold Mansfield
05-26-2016, 07:12 PM
I’m interested in buying an existing business that’s already making positive cash flow, rather than starting from scratch. The business will be a multi-unit fast food franchise (think Jimmy Johns, Dunkin Donuts). I was hoping to get a loan for $2MM as I've found a business with an annual cash flow of $500k, and thought I could pay off the loan with the cash flow alone. However, I asked for opinions regarding my chances on other forums, and most have told me that it would be impossible since I don't have much collateral/assets. If that's the case, if I apply for an SBA (7a) loan, then how much can I realistically get with this profile?

Annual income: $85k

Collateral: $80k

Net worth: $600k

Down payment: 20%

Other: I currently have no other loans or debt, 740+ credit score, good financial history

I'm not a banker, but if I were and you had no history of loans like this, I'd tell you to cash in your net worth, and collateral and I may consider a loan for the rest contingent on a full business plan with a realistic forecast and payment schedule.

I would imagine that your annual income would cease to exist once you start a business that needs you to be there full time. So that's not going to be counted as income, because it won't be.

You should start here and see if you fall within any of these special circumstances and then speak with an actual banker or loan officer to get some cold hard facts about your chances and if you have one, what you need to do.
https://www.sba.gov/loans-grants/see-what-sba-offers/sba-loan-programs/general-small-business-loans-7a

Fulcrum
05-26-2016, 09:39 PM
Not enough information given.

What is the asking price for the business?
How strong is the franchisor?
$500K cashflow - is that gross, net, free, owner benefit?
Have you recast the financials adding back depreciation and possible owner liberties?
What is the value of the assets in relation to the loan request?
Any chance the seller is willing to carry the financing? If not, why not?

Odds are you probably won't be able to qualify based upon the information given. When looking for this kind of money you need to have all your ducks in a row, dot every 'I' and cross every 'T'.