Saturday, August 2, 2014

Properly Structured Business Purchase deals can close quickly, even with Bankers involved

I came across this story about a bar/restaurant deal in California.  What strikes me is that the price was right, the buyer had experience and an adequate down-payment.  The deal came together quickly because the banker also saw that the deal made sense.  
Unfortunately what I see so often here locally is that sellers want unrealistic prices and so the businesses stay on the market forever and scare off the serious and qualified buyers.

CEO & President , Paramount Restaurant Brokers, Inc. DBA SellingRestaurants

SBA Loan funded in 45 Days for a Restaurant seems impossible, particularly in California where the state is over regulated with delays in liquor license transfers, fictitious name filings, health inspections, fire inspections, entertainment licenses and the list goes on and on.
But there are rare instances as in the case of Pirates Grub N Grog in Channel Islands California, where there are motivated parties on all sides of the deal, buyer, seller, banker and broker.
I entered into contract with Pirates Grub N Grog representing the Buyer. I knew the business well and I knew the owner just as well. I had already prepared the valuation analysis using the tax returns. Sales price $525,000. Knowing I was getting into contract, I contacted my banker to have him review the restaurant's financials. I knew we had a strong business with an adjusted net in the $240,000 range. Bingo on the value.
Then I sized-up the buyer. Solid experience! About $110,000 cash. A FICO in the 750 range. Owned real estate without debt worth $350,000. We went for a loan of $400,000 including $40,000 of working capital. We had the seller carry $75,000. The buyer would be out of pocket when escrow closed about $69,000. I polished his resume.
We had loan approval in 8 business days. But before that I had gotten the lease negotiations and liquor, license transfer process underway only because I knew the deal was solid on all sides.
This started June 20th. We are funding the loan this week July 30.
The banker said he has never seen a deal fund so fast and particularly for a restaurant with all the regulations in California. But it is all in preparing the business and buyer as well as having motivated parties to the deal. read more

To learn more about how to properly find and buy a business with or without a broker, consider enrolling in my 16 week business buyer course which begins this fall  Click for more info

No comments:

Post a Comment