Posted: 5/4/2015 8:34:25 PM EDT
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So, I have a quick question. My wife and I have found a greenhouse business that is for sale in a great location that we would like to buy. It has been for sale for six years, and hasn't seen much action until recently. They just lowered their price from 1.2mil to 400k since they have retired and want to get rid of this.
I am debt free except for the 70k that I owe on my house. However, we don't really have any other assets. What are our options for getting financing for something like this? Are banks willing to loan to people for restarting small businesses? The current owners are willing to do a land contract, but they are asking for a $80k down payment. Will a bank give us a loan for a down payment on another loan? I am new to small business loans, but we could make a good profit on the business. |
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Quoted: So, I have a quick question. My wife and I have found a greenhouse business that is for sale in a great location that we would like to buy. It has been for sale for six years, and hasn't seen much action until recently. They just lowered their price from 1.2mil to 400k since they have retired and want to get rid of this. I am debt free except for the 70k that I owe on my house. However, we don't really have any other assets. What are our options for getting financing for something like this? Are banks willing to loan to people for restarting small businesses? The current owners are willing to do a land contract, but they are asking for a $80k down payment. Will a bank give us a loan for a down payment on another loan? I am new to small business loans, but we could make a good profit on the business. LOL. First step is to write a business plan. DO NOT SKIMP on doing the market research, marketing research and actual value of the business research. Also if serious, get him to give you his books for the last three years, hand books to an accountant and ask if they pass the sniff test. |
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The previous three tax returns show $65,000 profit from being open March through July. We could turn this into an eight month business and turn a decent profit.
The place is located on a four lane highway going into the biggest city in the county. The only competitor is the Walmart located 10 miles north. |
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Quoted: The previous three tax returns show $65,000 profit from being open March through July. We could turn this into an eight month business and turn a decent profit. The place is located on a four lane highway going into the biggest city in the county. The only competitor is the Walmart located 10 miles north. Property loans for business are typically not done for more then 20 years. So what you are saying is that you can live off of 2600 a month. ETA: This is of course if EVERYTHING goes exactly according to plan and you get a great interest rate |
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Quoted: The previous three tax returns show $65,000 profit from being open March through July. We could turn this into an eight month business and turn a decent profit. The place is located on a four lane highway going into the biggest city in the county. The only competitor is the Walmart located 10 miles north. |
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Quoted: That doesn't sound like nearly enough to purchase for 400k. Business owner here. Research, Research, Research... Quoted: Quoted: The previous three tax returns show $65,000 profit from being open March through July. We could turn this into an eight month business and turn a decent profit. The place is located on a four lane highway going into the biggest city in the county. The only competitor is the Walmart located 10 miles north. Yup. |
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We do have experience running smaller greenhouses. This would be a big step up.
I was a facilities manager responsible for 10 maintenance shops and 50 employees in Afghanistan. I am confident that we could make this business work. My questions are on the financing options available to us. |
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I recently went through this purchasing a practice. Typically banks don't want to lend to you unless you have already been in business for 2 years. If you are looking to get a loan as a start up business, banks do not lend for real estate acquisition. If you go through SBA you need to have a complete business plan with market analysis and 3 years of projected income and growth. Also, if you go the SBA route you will need to contribute 1/4 to 1/3 of the total amount you are asking for. So for a down payment of $80k you will be expected to bring at least $20k to the table.
Honestly, the easiest and most often utilized source of funding is a personal loan and or a home equity loan. |
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The business is 9 greenhouses placed on 5 acres. They only used the one big greenhouse in the front during the last few years that they were open before they retired. The business has been sitting idle for 6 years. All the equipment is still in place and proven to work.
There is also a farm house that rents for $700 a month on the property. Quoted:
That doesn't sound like nearly enough to purchase for 400k. Business owner here. Research, Research, Research... Quoted:
Quoted:
The previous three tax returns show $65,000 profit from being open March through July. We could turn this into an eight month business and turn a decent profit. The place is located on a four lane highway going into the biggest city in the county. The only competitor is the Walmart located 10 miles north. |
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Quoted: That doesn't sound like nearly enough to purchase for 400k. Business owner here. Research, Research, Research... Quoted: Quoted: The previous three tax returns show $65,000 profit from being open March through July. We could turn this into an eight month business and turn a decent profit. The place is located on a four lane highway going into the biggest city in the county. The only competitor is the Walmart located 10 miles north. Not knowing all the details, the price seems high to me as well http://www.bvmarketdata.com/pdf/1Q14PDU.pdf |
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Quoted: The business is 9 greenhouses placed on 5 acres. They only used the one big greenhouse in the front during the last few years that they were open before they retired. The business has been sitting idle for 6 years. All the equipment is still in place and proven to work. There is also a farm house that rents for $700 a month on the property. Quoted: The business is 9 greenhouses placed on 5 acres. They only used the one big greenhouse in the front during the last few years that they were open before they retired. The business has been sitting idle for 6 years. All the equipment is still in place and proven to work. There is also a farm house that rents for $700 a month on the property. Quoted: Quoted: The previous three tax returns show $65,000 profit from being open March through July. We could turn this into an eight month business and turn a decent profit. The place is located on a four lane highway going into the biggest city in the county. The only competitor is the Walmart located 10 miles north. This sounds like a BIG red flag to me. |
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Quoted:
This sounds like a BIG red flag to me. Quoted:
Quoted:
The business is 9 greenhouses placed on 5 acres. They only used the one big greenhouse in the front during the last few years that they were open before they retired. The business has been sitting idle for 6 years. All the equipment is still in place and proven to work. There is also a farm house that rents for $700 a month on the property. Quoted:
Quoted:
The previous three tax returns show $65,000 profit from being open March through July. We could turn this into an eight month business and turn a decent profit. The place is located on a four lane highway going into the biggest city in the county. The only competitor is the Walmart located 10 miles north. This sounds like a BIG red flag to me. Which part? They had been asking $1.2 mil which was way over priced which is why there was no interest prior. They just lowered the price. |
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Quoted: Which part? They had been asking $1.2 mil which was way over priced which is why there was no interest prior. They just lowered the price. Quoted: Quoted: Quoted: The business is 9 greenhouses placed on 5 acres. They only used the one big greenhouse in the front during the last few years that they were open before they retired. The business has been sitting idle for 6 years. All the equipment is still in place and proven to work. There is also a farm house that rents for $700 a month on the property. Quoted: Quoted: The previous three tax returns show $65,000 profit from being open March through July. We could turn this into an eight month business and turn a decent profit. The place is located on a four lane highway going into the biggest city in the county. The only competitor is the Walmart located 10 miles north. This sounds like a BIG red flag to me. Which part? They had been asking $1.2 mil which was way over priced which is why there was no interest prior. They just lowered the price. This part. But you are really not listening to what people are saying about this. Go write a business plan. Seriously. If you do it, and are honest about it that will answer almost all of your questions. Then once you have that done, go sit down with an SBA adviser (free) and talk with them about it. |
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Quoted: Which part? They had been asking $1.2 mil which was way over priced which is why there was no interest prior. They just lowered the price. Quoted: Quoted: Quoted: The business is 9 greenhouses placed on 5 acres. They only used the one big greenhouse in the front during the last few years that they were open before they retired. The business has been sitting idle for 6 years. All the equipment is still in place and proven to work. There is also a farm house that rents for $700 a month on the property. Quoted: Quoted: The previous three tax returns show $65,000 profit from being open March through July. We could turn this into an eight month business and turn a decent profit. The place is located on a four lane highway going into the biggest city in the county. The only competitor is the Walmart located 10 miles north. This sounds like a BIG red flag to me. Which part? They had been asking $1.2 mil which was way over priced which is why there was no interest prior. They just lowered the price. Any lender (bank of SBA) will ask the same questions. They will want proof that the earnings support the value of the business and also that it generates enough free cash flow to service the loan. |
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They've got a property sitting idle they want cash from. You're confident it will work.......
My suggestion is go have a long hard talk to explore an owner financed deal. If they wont outright finance consider an operating lease. You get the business back operating for a couple years to prove financials for a loan. They get a lease payment while you add value to their property. |
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Quoted:
They've got a property sitting idle they want cash from. You're confident it will work....... My suggestion is go have a long hard talk to explore an owner financed deal. If they wont outright finance consider an operating lease. You get the business back operating for a couple years to prove financials for a loan. They get a lease payment while you add value to their property. I like that idea. I will bring that to them and see what they say. |