Coming up with the down payment proving difficult

I am wanting to become a new franchisee but in an established area. Judging from my screen name, you know in what service industry. The sale of the business is $305,000 but after franchise fees, closing costs, etc. we are looking at a total project cost of around $342,000. I am looking at getting an SBA loan and after having discussions with the bank, it has been determined that the best way to go is that we put 20% down, the seller does a 10% seller hold-back which I would pay over 5 years plus interest, then have the rest be financed. The plan actually sounds good to me other than one thing, the 20% is proving elusive. My question is this... Can I get a private investor that can serve as a lender to give me that 20% down without giving them equity but rather treating them as a lender? Or would that be looked upon as me incurring more debt and it would not count as assets? Is there a way around that? We have worked tirelessly on getting this business and we HAVE to find a way to do this. Please help as my family's financial future is depending on this working out.

Welcome to the forum Window Cleaner. Going off your numbers, I take it you need about $70k for the down payment. How much of that do you have and how much do you need?

I wouldn't worry so much about whether any money you receive is counted as debt or assets, unless that will affect the loan. The more pressing issue is getting the money. I'm not sure if you'll be able to find an investor who isn't interested in equity, since that's usually why someone invests. You want a loan so I would look for someone specifically willing to lend you money.

Is it possible you have family and/or friends who'd be willing to lend you money? $70k is a lot, but if you can supply a good chunk of that on your own, you might then get the rest from several different people.

If that won't work, would you be willing to give up some equity for the money? Maybe a silent partner who'll take some stake in the company, which you can buy back over time?

I'm not sure if any of that helps, but I wanted to give you a reply to keep your thread active in the hopes that someone who can help more will find it.

I'm concerned about the amount of leverage your proposing in this purchase. Business is risky enough as it is, but adding another $272,000 when you're just starting out is asking for trouble. Can the cash flow of this franchise handle upwards of $6,000/month as a loan payment?

As for private lenders, put yourself in the shoes of a prospective lender. If they're fronting a majority of the down payment funds, why not put up the difference and hire a manager rather than have a partner?

I can help with this, PM me.