Question about business loans?

Question

I want to borrow about $30k-$40k to buy a barbershop that is for sale. The barbershop is already making money, the owner is just retiring.

I am not a barber nor have i ever owned a business before. My only experience is renting out a home that I own. Which is similiar to a barbershop, which has stations and stylists pay per week/month to rent out the stations. I would be an absentee owner.

My question is...What are the chances a lender would loan me the money? Also where is a good place to start?

Answer 1

banks primarily look at but are not limited to credit, collateral, cash flow and direct experience iin industry. You need to demonstrate that you can place experienced staff. You inexperience and absentee ownership is a huge barrier, but at this dollar amount you may qualify for a credit scored small business loanif you have good credit and outside sources of income.

Answer 2

Before you research loans, research the viability of leasing stations.

Did the previous owner lease stations? Are they full? If you can lease, how much would you be able to charge? Is it practical for you to leave the stations unattended?

Other than debt, what would be your costs (i.e. rent, phones, etc.). When you say it is already making money is that based on the retiring barber's contribution too? If so, and he won't be there subtract the value the current barber provides.

Real estate and running a business have exact opposite factors for increasing value. If you maintain real estate and it is in a good area, it will typically appreciate.

Businesses don't work that way. In order to get appreciation for a business, you typically have to build it, maintain and show profitability. Even then, it can be hard to sell a retail type business.

If all these things check out and the numbers make sense....then you are at a point to consider financing. By the way, these are the same questions and concerns a lender would have.

Answer 3

You probably need to start with a local financial institution, maybe one you have already borrowed money from before and tell that about the investment property and what your plans are. The main thing most banks look at is the collateral and not necessarily the borrower as a way to determine whether or not to provide financing. If the property is under priced for the area, alot of banks would probably loan 100% of the purchase price. There is also a good chance they might require around 15% down payment since it is a business loan.

Answer 4

The business of lending is a dense one and should be researched properly. To get started, I suggest contacting the Small Business Administration (SBA). Entrepreneur also offers a great site dedicated to money & finance – see below for both.

Research, research, research – this cannot be stressed enough. Read as much as you can about the process. Here are some book titles that are relevant:

* How to Get a Small Business Loan: A Banker Shows You Exactly What to Do to Get a Loan (Small Business Series, No 1) by Bryan E. Milling
* The SBA Loan Book: Get A Small Business Loan--even With Poor Credit, Weak Collateral, And No Experience by Charles H. Green
* The Insider's Guide to Small Business Loans by Dan M. Koehler

There are plenty of free informational resources out there. Check the source box for links to articles.

Hope that helps! I wish you much success & happiness in all your ventures!

Answer 5

bank finances not seeing your experience in the related line,they see your credit standing it is much easier to get loan on running business,go for it .you said there is a place available already .just ask the owner how much they are making gross take out your expenses from thatyou will be able to know approx how much you can make.you can increase the sale too .