With the current banking environment and the significant loan losses that the banks have incurred, everyone is finding that credit to buy a business, expand a business or acquire properties is much harder today than it was 3 months ago. 

Why do losses affect current borrowings?  A senior bank Vice President explained that if a bank had $2 billion of lossess, the portfolio of the bank much change.  Banks will allocate a certain percentage of their assets to say mortgages.  If we assume 20% is allocated to mortgages, then a $2 billion loss means that the portfolio of current mortgages has to be reduced by $400 million in this case.  Banks want to lend first to their good customers and then they will look at new business.  Since so many people are looking for financing, the banks have become very selective in the financing they are offering.

According to some firms in the financing field believe that the financial markets are in turmoil and new types of financing will continue to evolve over the next 12 months.  Until bank profitabilty increases and the introduction of new products is stabilized, it is believed that financing over the next year could be a challenge for many firms. 

Does anyone have experience that they would like to share regarding problems or successes that they have had in a recent business financing?

Are you having troubles trying to sell your business - is the price too high?  are you in an industry which is being affected by external events detrimental to your business? For example high gas prices are affecting car sales which in turn affect all companies related to the automotive industry.  This affects trucking companies, CNC shops and many more.

Do you need to market to a competitor?  How do you give information to a competitor without revealing too much information about yourself?  You never should reveal your customer list at the beginning of your negotiations.  You may want to have a middleman/broker talk to your competitor because your company name will not be identified.  Purchasers can use information about your business for their own interest.  By telling customers you are for sale, customers may be concerned your stability and not provide you the business.  Often you can get a much higher price from selling to a competitor however you must proceed carefully in order to ensure confidentiality is maintained for the present and in the future in case your negotations do not succeed.

Even though you want to buy a business immediately, it often takes 12 months to buy your first business.  Peoplel often do not know what they are looking for.  The first business they view may be the best however they have expectation that the next company for sale will be better than the first company they viewed.  it is possible by the time they realize that, the first company has been sold.

Often, investors do not what industry they want the businesss to be in.  Determine what are your strenghts, determine in your past experience, do you have business contacts.  Can they be used in a new business adventure.  What type of business product do these business contacts want, do they want a service, a product.  You are buying a business in order to make it grow therefore it is important if your past can help your future.  You can then modify your search to look for a business that will benefit from dealing with your current business associates.

If you do not have business contacts to use, then look for what interests you.  If you have had formal training or exposure to a business, then concentrate in those areas.  If you are good at people but do not know how to run a business, then look to purchase a franchise.  Do you buy a new or resale franchise.  if it is a current business, you have less risk because you know the amount of revenue that can be achieved.  If you buy a business business/franchise, the amount of revenue that you can attain is an unknown. Projections provided by a vendor/franchisor are only projections, sales may not reach the limit in a projection.  In all my years in business, I have only seen one negative projection.