Page 142 -

Buy Y our Own Business

Training

Each business dictates how much time you need for postclosing training.
Negotiate a period that makes sense for you. But if you think the seller should
stay on for a year to train you, chances are you’re buying the wrong
business.

Step 6: Finance the Purchase

Banks have everyone fooled. From their ads, you’d think that their vaults are
open and ready to lend money to budding entrepreneurs, but that’s not
reality.

There are only four ways to finance a small business purchase:

1. Pay all cash.

2. Borrow from family and friends.
3. Secure a government-fi nanced loan.
4. Arrange seller fi nancing.

The first three have downsides. The next section explains why.
Pay All Cash

Even if you can afford it, paying all cash doesn’t make sense unless you get a
massive price concession, or the deal is very small.

Borrow from Family and Friends

If you’re going to count on family and friends, get them involved in the proc-
ess and committed to exactly how much they will lend you. Their intentions
may be sincere, but often they don’t deliver. If you can’t demonstrate that you
have the resources, the seller or broker won’t take you seriously.

Secure a Government-Financed Loan

The Small Business Administration (SBA) guarantees 75 percent of the loan a
bank makes to you, and finances up to 80 percent of the deal. That kind of

leverage is definitely attractive—but few get them. Both you and the business
must qualify, and the standards, and the fees, are tough. In many cases, you’ll
be required to ante up substantial personal security, such as your house.

119

8/23/07 3:17:30 PM
c12.indd 119
c12.indd 119 8/23/07 3:17:30 PM