QUESTION ON How To Get a Loan To Finance a Business
My friend and I are interested in buying a business. Well actually it is a number of businesses in one area. They are a total of four bars and 3 small businesses that are up for sale. What I want to know is how do we go about getting a loan to purchase these businesses? We are young and have lots of ideas for these businesses because we have been patrons for a number of years.
– Tyris Williams
Advice by Tammy Harrison
Enthusiasm is key! If you can portray your confidence , enthusiasm and your knowledge in everything that you do – you will go far!
First, no need to purchase all of the businesses. If you buy just one and make a complete success of it, the others will go by the wayside and you won’t have to spend the money to buy their failures! Is it feasible, though, for you to start the same type of business from scratch instead of buying someone else’s headaches? Do some cost comparisons to be sure. If the business has some great tangible assets as part of the sale price and a low debt ratio, it may be worthwhile.
I worked in a very large bar for six years, working my way up from waitress to co-manager. There are a LOT of variables to making this type of business a success but the most important is customer service–sometimes no matter how terrible the ambiance or entertainment is it could just be the employees who can help make bring and maintain customers.
Next, you need to spend time with the books. Research, research, research. Prepare the most professional business plan you can as well as a marketing plan. The more prepared you are for your potential investment audience, the more likely you will be to attract their attention.
In the bar business, you have some serious liability issues. I would recommend going to the bank LAST for financing. By the time I was ready to leave my previous position, I had people clambering to give me money to start my own establishment. Have you thought about working in those places you spoke of below to learn the ropes and to be seen and heard around the area?
If you want to go to a lending institution to apply for a loan, be ready. They are going to look at your experience and your age and make their determination based on a lot of variables that you may never know about. If you have past credit problems, it will probably be their first rejection issue. You have to convince them that they will get their money back from you (plus interest) and that you would be honored to make them your institution of choice for your future endeavors. The saying is true, “never let ’em see ya sweat”. You will need excellent credit references and/or a co-signer who is reputable with good credit to proceed in this manner.
I cannot say it enough, be prepared. Know what the competition is, know how you are going to sell your business to the public, know what kind of income you are expecting and what kind of overhead you will endure. Know your numbers and know your marketing and know your goals. The more enthusiasm and knowledge you can share with lenders, the better your chances are of receiving the loan you seek.
Also, read the following articles:
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Article originally published in February 2000. Updated February 20, 2012Tammy Harrison is a successful home-based working mom for over five years. She holds a degree from Mizzou in Consumer Economics. Her business focuses on Marketing and Creativity for Small Businesses as well as numerous other small businesses.
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