Oct
07
Commercial Mortgage or Business Loan?
By
My sister currently owns a daycare and will be selling in a couple of years I am wanting to buy the daycare when she is ready to sell, how hard will it be to do this? The daycare has been up and running great for almost a year so there shouldn’t be any worries about it going under but I wasn’t sure if this would affect anything. Is it harder than getting a 1st mortgage? Just needing all the info I can get.
Sell House Quick
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3 Comments
April 26th, 2009 at 11:47 am
This all depends on the loan size vs. the equity of the establishment. It also depends on your credit, income, so forth. I have done several commercial loans, and they are not as complicated as people make them out to sound. If you have any questions, feel free to email me at
April 29th, 2009 at 9:42 am
The real question is are you buying the building along with the business or just the buiness? If you’re only buying the business I would look into an SBA loan. If you are buying the building then you most likely will need a commerical mortgage for the property and possibly an SBA loan for the business.
Good Luck
I
May 2nd, 2009 at 12:06 am
samilynn04,
When you go to the bank to buy this business, you’ll need a couple of things:
1. Collateral: Do you own your own home? If you refinance your home, will you have enough to buy this business? Do you have other equity (Stocks, bonds, real estate, CDs) that you can collateralize? Most lenders can allow you to take up to 90% of the value of your home in cash or 75% of your investable assets. To figure out how much equity you have in your home, do this simple formula:
(Value of the home X .9) – Amount owed on 1st and 2nd mortgage.
This is your home equity and after you’ve been in business for 24 months you can “rebrand” this equity into your business’s name without giving the business “ownership” to your equity.
2. If you don’t have equity in your home and the business is worth over 25k, but under 250k then you’ll have to find an Angel investor. This is a someone who has confidence that your business will succeed and who is willing to front you the money to transfer ownership. Your local university will have a list of these individuals.
3. If the amount is over 250k, you have a credit score over 720 and 10 years in the business, then the Small Business Administration *may* be able to help. The SBA lends millions of dollars out a year for business aquisiton. However, the SBA only guarantees a large portion be repaid to the bank should you default on the loan. That means that you still have to qualify for the loan through traditional bank underwriting. If the business you’re purchasing is “approved” by the bank; you will be able to use the cash flow from the business tax returns to support your ability to repay the loan. If the business is not approved, you’ll have to support repayment without the income from the business. Now this is important. If you cannot use the income from the business to support repayment, then you’ll be forced to show that you can pay back all of the loan within underwriting guidelines with your “day job.”
If you really want to know where to start, follow this link to get the SBA’s personal financial statement form. Every lender will request it, so might as well start putting it together now.
As always, you can contact me at the branch.
813-681-2866
Good Luck!
Frank