This article are provided for information purposes only, and are not intended as legal advice.


Is it easy to get funding to buy a business?

January 6th, 2010

You are looking to buy a business, found what you are looking for but do you have the money to buy the business?  Too many people look for businesses that they cannot afford.  They look for a business what they want, not what they have funds to buy.  Many people assume, even in this market, that the banks will lend them money or an investor will give them money because it is a good opportunity.  The buyer of the business, who has no money, is willing to pay someone a 10% interest rate which is above what the bank is paying and they think that the investor should be happy that he is getting such a good rate.  The buyer of the business does not realize that the funder is taking all the risk, the buyer is putting up very little therefore there is no incentive for you to preserve someone elses money.  If an investor is taking all the risks, they are not willing to generate only a 10% rate of return.

 

Too many buyers of businesses are naive, they think that their idea is worth millions even though they have no profits, their business will generate $10 million in sales in year one and will be wildly successful.  They create cash flow statements to support their numbers but have no support for any of the assumptions used to create the cash flow report.

 

When looking for financing, the cash flow statement needs to be detailed and well thought out.  You need to document your assumptions.  If they are unrealistic, the financier will look no further.  Keep in mind, there is lots of money out there and many people trying to get the same funds as you.  The banks and venture capital firms can pick and chose what they like and the risks that they will take.  Unless your proposal is sound, well thought out, well researched and not I am paying you a good rate so you should be happy, your chances of success to finance your new business will be far greater.


Filed under: Financing a business — Gary Landa @ 10:18 am


No Comments »


No comments yet.


RSS feed for comments on this post. TrackBack URL


Leave a comment


You must be logged in to post a comment.