Interested in buying an established franchise for 150k with great cash flow

[415]

Hi,

I'm interested in buying an established sandwich franchise which is being sold for 150k. The cash flow is a little over 70k a year and ran absentee. As for my credentials, I'm currently a taxi driver that takes home about 6k a month after expenses. I have little to no collateral and my credit score is 700+. My question is, what is the probability of being offered a SBA loan to purchase this kind of business assuming all the assets of this establishment will be used as collateral?

Also a side note I have extensive experience in the food industry, if that means anything.

[vangogh]

I'm not a bank or the SBA so I can't tell you whether or not you'll get a loan. The best way to fid that out would be to ask either a bank or the SBA. Regardless of whether or not a loan is through the SBA, it's a still a loan from a bank and banks loan money to people they feel confident will be able to pay the money back with interest. You make money and your credit is pretty good. The negative is the lack of collateral.

It sounds like your thought it the collateral is ultimately the business. If that's the case I would spend time working on a business plan specifically for the bank. There are plenty of examples online and I'm sure there are people who offer services helping you put one together. Maybe have a preliminary business plan written out just for you so you can better answer their questions if they have any. Then check with your local bank or local SBA office and ask. If they need a proper plan you can put one together for a second visit.

My guess is it will probably help if you don't need to borrow all $150k, but have some money of your own to put up as well.

[Freelancier]

Is current owner financing an option?

[415]

Thanks for the responses.

The owner is willing to finance 25k. Is it possible to use this option to cover the down-payment?

[Freelancier]

No. That's not a down payment, that's a promissory note and no cash.

If you don't have the cash for the down payment, forget the opportunity. The problem is that all businesses require cash flow even during bad times; what that means is that you might have to personally come up with payroll or the money to replace a grill. If you're not prepared for that right now, you shouldn't take on this particular opportunity.

[SocMediaMaven]

Out of curiosity, why are you giving up $72 K take home pay for $70 K cash flow and debt? Typically cash flow isn't pure personal income. Is it a pass passion? From what I understand, the restaurant business can be a beast.

[Fulcrum]

Out of curiosity, why are you giving up $72 K take home pay for $70 K cash flow and debt?

I believe he said it was an absentee ownership income amount. That way he won't give up the current 72K income.

I don't see this purchase happening though unless the OP can come up with a larger down payment and the seller is willing to finance 50%+.