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Andrewcuda
02-21-2017, 11:45 AM
Alright so what I need help with is she wants to get a loan for $40,000. The store owner is going to sell her the store for $30,000 and the rest will go towards license transfers, setting up a bank account for the store because he runs it from his personal account and then inventory for the first month. The business has been up and running since 1974 and makes profit every year. I have been helping her to build credit she is 21 with a credit score of 667. So my question is what would the best route be for her to go I don't think she can get approved for a loan that size with her normal income but someone told us there is grants for young women to start a business just not sure what would be the best approach. Any help is much appreciated.

Extra info: Where located in central North Carolina. Business she is buying is a family owned pet store that's ha been profitable in the same town for over 40 years .Reason he is selling is because he wants to retire. She has been working there for 2 to 3 years 6 or 7 days every week so I am confident she will have no problem he also said he will help her with what ever she needs after he retires and I to have ran a pet store in a previous state that I lived in so I am pretty knowledgeable in this area. The bank told her if she if she doesn't have the business I'm her name and get an EIN and some other thing like an articles of corporation I think. Again any help is appreciated.

Fulcrum
02-21-2017, 05:48 PM
So what we've got here is a 21 year old woman looking to buy a pet store for $30,000 plus inventory. The store has been long established (40 years) and is profitable.

I've got some more questions (you don't need to answer publicly):

1) Based on the current financials of the business, what is the gross profit and net profit?
2) What sort of competition will she have within a 1, 5, 10, 25 mile radius?
3) Is there real estate in the deal? If not, are the lease terms fair?
4) If the store is dependent on location, are there major retailers that could add pet products to their line up and take away from this store?
5) How much off the books income is included in the asking price?
6) How much cash does the buyer have for a down payment (money not loaned)?
7) Since there is a low chance that she will get a loan (pigs flying may happen first), will the seller be willing to finance her purchase over 3-5 years?

On the surface there seems to be an opportunity here. I highly doubt she will get a loan, though who knows what the government will do when it comes to grants. I think the better option would be to leave the government out and work directly with the seller.

Andrewcuda
02-21-2017, 08:09 PM
1) As far as gross profit and net profit not entirely sure I understand the difference, and would have to check and get back to you.
2) Competition wise you have a pet smart and Walmart that carry supplies and pet smart carries fish but are none for poor quality fish with health issues there are about three miles away in the same shopping center. Then there's is another family owned pet store that is about 10 miles away it's in a shopping center as well but every store that was in that center closed down except for around 3 a rent a center a boot store and the pet store which looks like it's going under every time I go in there they have less and less I think they are on the verge of closing. Around 15 to 20 miles away there's is another family owned pet store haven't been to it but I here it's pretty good.
3) Lease is $1200 a month for around a 2000 square foot building which I think is fair.
4) I don't think is necessarily dependent on location and she is gonna want yo either buy or build a bigger store because of future plans that won't coincide with her current location. 85% of her customer come every week and there is always new people from word of mouth and as of right now there is no social media for the store which will increase business drastically and there are many request for reptiles different fish and other small animals that he won't carry because of the extra work load. Most of there business is made on fish and right now they are averaging between $11,000 to $14,000 a month in sales and thats with the same stuff that he has been carrying for the last 4 or so years she is going to expand her inventory there for bringing more customers.
5) I dont think there is any off the books income but am not sure how to even find that out.
6) Zero cash for down payment.
7) No they will not the seller is still working there and wants the $30,000 to pay off house so he can sell and have closed by June when he retires.

Andrewcuda
02-21-2017, 09:53 PM
I sent a reply to you but it said waiting on admin approval or something like that.

Harold Mansfield
02-21-2017, 10:28 PM
$40k means expecting everything to go exactly right, no issues, and right out of the gate she will continue making the same profit as the previous owner with no budget for marketing what so ever.

Second thing, if it was that profitable he'd be selling for more than $40k. Rough estimate, a store making ( and from what you have said) clearing let's say $8k a month ($96k a year) is worth at LEAST that $96k. Why would you sell something making $100k a year for $30k? Something doesn't add up. Sounds like he's trying to get from under it for some reason. I'm not buying the "just want to pay off the house" so I'll take $70k less excuse.

Third thing, no one is going to give a 21 year old with no assets, barely ant credit history, and no sizable income $40k without collateral, a co-signer, or unless she's a vet with GI Bill benefits.

JMO, but it doesn't sound right and the risk sounds even worse.

Andrewcuda
02-21-2017, 10:35 PM
He was just gonna give it to her straight out when he retired because his kids don't want it he just got cancer and his fiance lives 2 hours from his house reason for selling the house but he still owes the 30000 to finish paying of the house she is pretty much like a kid to him the store goes to her in his will if he dies.

Harold Mansfield
02-21-2017, 10:53 PM
He was just gonna give it to her straight out when he retired because his kids don't want it he just got cancer and his fiance lives 2 hours from his house reason for selling the house but he still owes the 30000 to finish paying of the house she is pretty much like a kid to him the store goes to her in his will if he dies.
OK, that floats. That was important information. Before it sounded shady.

Still, $40k is not enough. I should say, it's a huge risk that NOTHING will go wrong and that there will be NO slow months that don't pay the bills, and if there are they won't happen until she's saved enough to cover it.

That's a pretty big risk that could blow up in the first 30 days.

At this point I'd want to hear a realistic marketing plan of how she'll hit the ground running, not just hoping to keep what he had. With a real marketing plan, and little competition in the area, I may take the risk. Still don't have any idea what kind of institution would loan her that money.

Grants take a long time to process, competition is steep, and getting the paperwork correct is an industry all it's own.

Grants usually have more stipulations that just being a woman or vet or minority. Usually they are specific to a certain kind of business dependent on which government department is giving the grant. Or to boost the economy in depressed areas. Or fill a need in certain areas. Say for instance if you were trying to open a veterinarian clinic in a farm town, that has no licensed vet for a 1k miles.

The EPA may give grants to women in business who have some kind of environmental tech, or business in a needed area like a fish hatchery. The Navy may be giving grants to women veterans who research how to help subs avoid disturbing whale pods ( I'm making the specifics up).

Get the picture? There's usually more to it than just the basics of what you hear. Retail is generally not the first priority there. Unless say it was a town with absolutely no market or something like that.

Also, connections work. People lobby their congressman for grants too. You don't just turn in the paperwork and win it like a lottery.

There are private organizations that give out grants, but they are usually specific too.

Also, reality check. This administration is not exactly running like a well oiled machine, departments are under staffed, and at will POTUS is calling for hiring, spending freezes and sweeping changes to things. Even if you did find a grant that you qualified for, and jumped through all of the hoops, I wouldn't depend on any stability with how money is being doled out because it could change tomorrow with a Tweet or because someone protested something so now he's cutting of funding to that department or the head of the department quit or got fired. That's not a political statement, it's just reality right now.


The plan is about 50%. She's going to have to get realistic about how much she REALLY needs, and have a real plan of operation to even begin to try and figure out the other 50%.

Fulcrum
02-22-2017, 07:36 AM
I think there is a viable business here, but I've got more questions from the answers provided, but it will be tonight before I can get to asking them. I'll let Harold and others handle the grant end of things.

Harold Mansfield
02-22-2017, 10:44 AM
I meant to also add that I think there's something viable here too. With that kind of deal where it's almost as if it's passed down by family, you have to at least try. It's not a lot of money, but it is if you're looking for a loan from a bank with no credit history.

But it is time to do some reality checks, and get serious about not just getting the business but running it.

Andrewcuda
02-22-2017, 06:26 PM
The plan is set I have helped run a pet store before and I know for sure I can increase client base with out a doubt the only issue at this point is the funding to take the store.

Harold Mansfield
02-22-2017, 07:17 PM
The plan is set I have helped run a pet store before and I know for sure I can increase client base with out a doubt the only issue at this point is the funding to take the store.

The fact that you have experience in this type of business shot my confidence level up another 25%. Your experience may go a long way in securing funds. Have you thought about going in partners with her, and putting your name on the loan app too? She's going to need help with the loan. As a partner you may have the min credit requirements to help things.

Andrewcuda
02-22-2017, 10:35 PM
I don't think I will get approved because I have unexpected hospital bills that were sent to collections I haven't paid them off yet I still owe like 1500 to pay and it hurts me when applying for stuff my score is back up from a 445 to a 580 but the collections hurts.

Andrewcuda
02-22-2017, 10:37 PM
I'm thinking I might be able to convince her Grandpa to cosign but I want to see what my accountant tells me first I have an appointment with her Friday morning.

Harold Mansfield
02-22-2017, 10:45 PM
I'm thinking I might be able to convince her Grandpa to cosign but I want to see what my accountant tells me first I have an appointment with her Friday morning.

And be on the lookout for landmines in the property. Maybe it's not the same where you are, but I've worked for people who purchased existing bars, and as soon as the ownership changed, new inspection, and they were on the hook for a bunch of new repairs to meet new codes that the old owner was grandfathered into from having to change.

Get all of that checked to make sure there are no surprises if you are able to boot strap this.

Andrewcuda
02-23-2017, 03:05 AM
The property is good I have been there for an inspection when they sent a new inspector I was thinking he was gonna get slammed because the old inspector was another older man and would come in talk to him for like 15 minutes not even look around and say OK your good. The new guy came in was there for like an hour and a half and had one problem he found a leaking tank that was puddling by some chords they changed the tank before he even left some I think I'm good on that front

Business Attorney
02-23-2017, 05:26 PM
Second thing, if it was that profitable he'd be selling for more than $40k.

Harold, on paper you are absolutely correct, but there are two points you overlook:

(1) When small businesses say that they are "profitable" they often mean that they make a decent living as a full time employee of the business. If they had to pay someone else to do their job (if they could find someone), the profit picture would not look as rosy. If the owner is entitled to $4K a month, then the business itself is only clearing $4K, making it worth far less.

(2) In small cities and towns it is not at all unusual for owners to just shutter profitable businesses when they retire. There are often no buyers because of point 1. The buyer is generally buying themselves a job, and having to risk cash to do so. Finding that person in a reasonable time frame is often difficult, if not impossible.

Andrewcuda
02-24-2017, 03:13 AM
Well in this situation there are two employees him and her he pays her roughly $19,500 after taxes and himself $40,000 plus what ever he needs for medical expenses She's no looking for a business where she don't have to physically work she enjoys her job very much so when she buys the store she will run it with my help but won't have to pay me so she could take up too $60,000 plus if she wanted to but she said she's only gonna pay herself $25,000 and put the rest in a savings account.

turboguy
02-24-2017, 09:52 AM
Since it is generating a good profit what if she offered to pay more but on a 100% financing. For example offer to pay him $ 1,000.00 a month for 48 months but he has to leave enough money in the company to cover operating expenses while she gets it going.

Andrewcuda
02-24-2017, 11:40 AM
Since it is generating a good profit what if she offered to pay more but on a 100% financing. For example offer to pay him $ 1,000.00 a month for 48 months but he has to leave enough money in the company to cover operating expenses while she gets it going.

Read post 2 and 3 we covers that but thank you for the idea

turboguy
02-28-2017, 12:18 PM
Well, I will throw out an idea that i really don't know much about other than having briefly browsed a couple of the sites a few years ago. Would one of the crowd funding sites be a possibility?

Andrewcuda
03-03-2017, 12:17 PM
Thank you all for your input it has been very helpful.