本文发表在 rolia.net 枫下论坛I have been providing advice on small business topics. For some people, they do not have enough money of their own and don't know how to get finance. Some of them ended up buying a business that is too small to invest. I met a business owner yesterday. He paid $30,000 for a variety store. Based on the sales he told me, I estimate that he makes about $80/day. The store opens 12 hours/day, 7 days/week. I can calculate that his salary based on the sales is $6.70/hour, plus he has to do shopping, banking, bookkeeping, cleaning, etc. He can not even afford to hire someone if he ever gets sick! My personal opinion, the bottom line is $10/hour if you are desperate. In case you need to hire a temporary helper for $7/hour, you may still have some left to meet your end meal.
But the better the business the higher the price. For people who have limited assets, it sounds like I am talking about a snake can engulf an elephant. Well, everything is possible. Let's take a look some ways of borrowing:
1. Bank loan. Banks can provide commercial loan on store equity. The equity in a business includes store equipment, furniture, such as walk-in-cooler, air conditioner, store shelves, cash register... Ask the seller to put up a list of these things with fair estimate of current value on each item and include it as an attachment of the purchase agreement. If approved by the bank, you can get a small business loan upto 90% of the total value. Bank will charge you 2% one time application fee and upto prime rate plus 3 annual interest. Some banks also require an independent assessment of store assets before granting the loan. Such assessment may cost you around $300.
2. Vendor Take Back loan (VTB). If vendor eagerly wants to sell the business and likes your offer, you may ask to borrow from the vendor. Let's say the deal is $50,000 and you only have $35,000, you may ask if you can pay $35,000 first, the rest will be paid within one year. Be willing to pay interest too if asked and fair. Or, you offer to pay the purchasing price in full, and pay the inventory costs later. The latter approach is more common in practice. Be sure to include such arrangement in the purchase agreement. If you fail to make payment on time, the vendor may entitle to take possession of the business without compensation to you!
3. Private finance. If still short after exhausting the first two resources,you may consider borrowing from your relatives and friends. For people who have reliable credit background (decent income, house, or other investments), banks can offer a line of credit. Basically, you borrow from bank using your relatives' and friends' credit. You offer 2-3% higher interest than the bank charges, or 10% fixed rate whichever is higher.
Final word: People who are willing to lend you money have good faith on you. You should never eat your own words and break such trust. But business, the word itself, implies risk and uncertainty. And future is unpredictable. To ensure keeping your promises, such promises shall be made based on a careful calculation of returns from the business and always leave some room for unexpected events. That is to have an acurate business plan/projection.
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But the better the business the higher the price. For people who have limited assets, it sounds like I am talking about a snake can engulf an elephant. Well, everything is possible. Let's take a look some ways of borrowing:
1. Bank loan. Banks can provide commercial loan on store equity. The equity in a business includes store equipment, furniture, such as walk-in-cooler, air conditioner, store shelves, cash register... Ask the seller to put up a list of these things with fair estimate of current value on each item and include it as an attachment of the purchase agreement. If approved by the bank, you can get a small business loan upto 90% of the total value. Bank will charge you 2% one time application fee and upto prime rate plus 3 annual interest. Some banks also require an independent assessment of store assets before granting the loan. Such assessment may cost you around $300.
2. Vendor Take Back loan (VTB). If vendor eagerly wants to sell the business and likes your offer, you may ask to borrow from the vendor. Let's say the deal is $50,000 and you only have $35,000, you may ask if you can pay $35,000 first, the rest will be paid within one year. Be willing to pay interest too if asked and fair. Or, you offer to pay the purchasing price in full, and pay the inventory costs later. The latter approach is more common in practice. Be sure to include such arrangement in the purchase agreement. If you fail to make payment on time, the vendor may entitle to take possession of the business without compensation to you!
3. Private finance. If still short after exhausting the first two resources,you may consider borrowing from your relatives and friends. For people who have reliable credit background (decent income, house, or other investments), banks can offer a line of credit. Basically, you borrow from bank using your relatives' and friends' credit. You offer 2-3% higher interest than the bank charges, or 10% fixed rate whichever is higher.
Final word: People who are willing to lend you money have good faith on you. You should never eat your own words and break such trust. But business, the word itself, implies risk and uncertainty. And future is unpredictable. To ensure keeping your promises, such promises shall be made based on a careful calculation of returns from the business and always leave some room for unexpected events. That is to have an acurate business plan/projection.
Feedback welcome.更多精彩文章及讨论，请光临枫下论坛 rolia.net