When I first got into this business over 20 years ago I was selling motels, B&B’s, other businesses, and land, and most of the time I was dealing with customers and clients that were of European/American backgrounds and were native English speakers like me.

My prior background involves work in other countries, international travel, and a couple of years living in East Africa, so I missed dealing with folks from other cultures.

It wasn’t long before we started dealing with significant numbers of people from other cultures buying convenience stores, motels, and dry cleaners. Our clients, the sellers, were still mostly Yankees of some variety. Often they would take the position that they wouldn’t sell to some of our ethnic groups of buyers. In every case we gave them the alternative to either accept all financially qualified customers or not do business with us.

Now in todays small business marketplace we have a rich mixture of customers from many different backgrounds and ethnic groups, and we are selling businesses for clients from a wide variety of ethnic backgrounds.

It is not unusual to have the children of some of our customers translate for their parents in conducting a sale. Sometimes we have to study the culture a customer comes from in order to figure out why they react so differently than we expect to the process of negotiating and complying with contracts.

The challenges combine to make our work more interesting, giving us all more chances to learn about other cultures, and adds a rich variety to our work. One of the “byproducts” of our work is a broad range of friends we make while we are doing business with them, and it is great that they now represent such a diverse group.

We have had several closings recently, and are being courted by bankers looking for deals to finance.

There is a lot of gloom and doom being spread by political candidates and the national media about the housing slump, credit crunches, foreclosures, and stock market volatility that is leading to customers thinking that they can’t get financing for deals.

I recently had to convince a customer to talk to a banker to get him to believe he could get financing and get him to make an offer on a business that he wanted to buy, and now has under contract.

Here in New Hampshire our local banks by and large did not get involved in the sub prime rackets that are bringing down the speculators and large mortgage brokers, so our banks are looking for ways to put money to work, and at rates that are still bargains in historical terms for commercial business loans.

Additionally the nationwide lenders who specialize in SBA guaranteed loans are still looking for business, because the ones we deal with are unaffected by the housing market problems.

So the bottom line is that if you can swing a 20% down payment, have a decent credit score, and the desire to own one of the businesses we have for sale you should be able to get financing.

Take a look at our listings and call us if you see something you want to investigate.

One of the first things we have to ask a potential buyer is how they plan to finance the purchase of a business. This usually leads to an education session about the terms that a buyer can expect to get on a business/commercial loan. Forget everything you have read or seen on television about “no money down” deals. Be ready to pay 20% down or more, be prepared for Adjustable Rate financing, and be prepared to provide personal guarantees.

Most of the deals we broker end up with local bank financing, and once in awhile financing is provided by a national lender specializing in SBA guaranteed loans. Frequently Seller financing is involved for some portion of the deal, and some times buyers end up drawing down credit cards or going to the “bank of family”.

In cases of Seller financing we always advise sellers to get enough down so that a buyer “will bleed if they walk away”. There is no set percentage to put down, it all depends on the deal. The horror stories we hear about sellers having to take back businesses that have failed usually involve previous sales with very low down payments, so that the buyers had minimal risk.

Our first suggestion is usually to go to the institution that currently holds a mortgage on the business involved, because they know the business and will usually be the easiest to deal with (unless the business is a distressed property).

Many of the deals we handle end up with SBA guaranteed financing. The bad news about that is that it increases the cost, both closing costs and loan rates, the good news is that deals get financed when they otherwise would not. When real estate is involved the most desirable financing often involves SBA 504 program loans processed thru development organizations, and straight business loans are usually guaranteed under the SBA 7(a) program. Full descriptions of the SBA programs are available on the SBA web site, http://www.sba.gov/aboutsba/index.html. We frequently have customers tell us they have been counseled by advisers not to accept SBA guaranteed loans because of past experiences. The SBA guarantee process now is very seldom any problem, and most of the horror stories involve customers who have bad credit or checkered histories, or businesses that have either high risk or very poor histories. The SBA programs are guarantee programs that reduce a lenders risk, so either a bank or other lending institution is always the real source of the money and has to first approve the financing.
During meetings with some local bankers on August 15th the rates they were quoting for loans that fit under the 504 program were in the 7% range, less than prime rate. Rates they were talking about for SBA 7(a) loans were in the 8% range. We have recently received proposals from other institutions offering rates of 10.5% to 10.75% on packages that included operating capital and involved as little as 10% down. Rates in the range of 2.5% over prime are common in business financing. Also most business loans will be at adjustable rates, so one important thing to look for is how long the initial rate is locked in before adjustments begin. Those terms may range from 3 months to 5 years, or more.

So it pays to shop around for a package that suits your needs. But expect financing to be a lot more expensive than residential (or even commercial) real estate, and be prepared to make serious down payments.

There is a lot of mythology floating around about business financing. Instead of listening to your back fence neighbor or the bartender down the street if you have questions about financing ask one of us, or a banker, (or better yet two different bankers).