Steps to Buying a Business
Steps to Buying a Business
Carefully consider the decision to buy a business.
Educate yourself on the type of business you would like to buy and determine whether you would be better suited for an independently-owned business or franchise.
Conduct research on options of businesses currently for sale.
Determine how much money you can afford to pay.
Contact and consult with an Alamo Corporate Group business consultant on your goals and criteria.
Evaluate the businesses that are being offered for sale.
Confidentially tour the businesses you are interest in, note improvements or changes that you would make, location and “feel” of the business.
Through your Alamo Corporate Group business consultant, place a bid on the business in which you are interested.
Engage in negotiations with the seller through your business consultant.
Once an agreement has been reached, your business consultant will walk you through the details of finalizing a sale. Details include negotiations, new owner financing, complete documentation for the purchase and closing the purchase.
Close the purchase!
If you are a buyer and are interested in purchasing business, you may begin the process by: Printing out the Buyer’s Personal Profile Confidential Information & Financial Statement from below.
Complete the requested information
And mail or fax the forms to Alamo Corporate Group – Address:1303 Walnut Hill Lane, Suite 370, Irving, TX, 75038 or Fax: 817-615-8455. To print the documents, you must have Adobe’s Acrobat Reader. If you do not have Reader, follow the directions below:
Click on the Adobe logo to visit Adobe’s web site and download Adobe Acrobat Reader. Once you have completed the download and installation, return here to download the appropriate file(s).
How the Business Acquisition Program Works
Obtaining a loan to purchase a business is significantly different than other types of financing because you are not just buying a common asset such as a home or commercial building you are buying a unique operating entity. First Heritage Capital will simplify the process by identifying what you need and when.
SBA 7a Loans
The U.S. Small Business Administration was established in 1953 to assist borrowers in obtaining financing that is otherwise not available from ordinary ban lending programs. SBA loans are very similar to other commercial loans in that the Lender funds and services your loan with your relationship staying at the bank of origin. All paperwork is
handled by the Lender, so the process is not complicated for the applicant.
Who is Eligible for Business Acquisition Loans?
Loan approval is not limited to, but generally based on the following:
- Cash flow of the business being acquired
- Business experience of the buyers
- Credit history of the buyers
- Collateral available to secure the loan
Pledging Personal Assets
The loan will always be secured by the assets of the business. Personal real estate assets are not required to obtain loan approval; however, if the applicants own real estate, it will generally be required as additional collateral for the loan, expect in states where prohibited.
Personal guarantees will be required for anyone with 20% or more ownership in the business. In addition, the Lender may at their discretion require other individuals to guaranty, based on their involvement with the business.
You will interact with three bank personnel during the application process.
Business Development Officer
Your representative will help you through the entire process from application to closing. This includes assisting you with the application and gathering necessary documents to submit your loan for approval.
Your application will be submitted to an underwriter who will likely contact you to ask you questions about your application and the business you are buying.
If the loan is approved, you will be given a commitment letter and a list of items that need to be collected in order to close the loan.Â Your Documentation Specialist will assist you through the closing process.
Things to Consider
A new lease or Assignment of Lease equaling the term of the SBA Loan, inclusive of renewal options is generally required.
You need to decide if you will purchase the business as an individual, partnership, corporation or other entity. Consult your attorney and tax consultant to determine which is best for you. It is important to make this decision as early as possible.
The funds being used as a down payment for the business will be verified by the Lender in the form of two months of bank statements. Be prepared to provide this evidence prior to closing.
Owners may be required to have life insurance for some or all of the loan amount.Â If you don’t have an agent contacts may be provided.
Seller Carry Financing
At times sellers will carry back part of the financing. Sellers are generally required to sign subordination agreements to the SBA loan. Consult your Business Development Officer for details.
It is often important to have the seller of a business assist in training and support while the business changes ownership. These agreements are allowed, however, they are not generally permitted for more than one year from the purchase date.
It is highly encouraged that buyers and sellers seek and use professionals such as business brokers, tax consultants and attorneys.