Can you cash-out refi a small business like a house?

Can you do a cash-out refi on a business like a house?

Jason Born asks if you can refinance to take cash out of a business like you can with a house?

Good question, especially if a business owner needs to get their hands on some money.

Bankers tend not to like seeing people remove the proceeds of loans being removed from the business.

However, you may be able to do an asset juggle with new financings that might work.

Changing terms of sale though, might be the easiest way to generate more cash.

Watch and learn more here: https://youtu.be/EBGiloDerZ4

Learn how to buy an already-successful and profitable business even in the covid-recession of 2020 https://www.BusinessBuyerAdvantage.com   

Book a call with me at https://www.clarity.fm/davidbarnett  

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Using machinery for collateral when borrowing to buy a business - Buy a business with no money

Using machinery for collateral when borrowing to buy a business.

Some people online say it’s easy to use a business’ equipment and other assets to borrow to fund an acquisition.

Is this really true?

This week I explain the different definitions of value and we’ll see if ‘Asset Based Lenders’ are truly the answer to getting ‘no-strings attached’ money to buy a business.

Watch as I explain how a pizza oven can have many different values depending on what’s happening:  https://youtu.be/hojEFy-pFtc

Learn how to buy an already-successful and profitable business even in the covid-recession of 2020: https://www.BusinessBuyerAdvantage.com   

Book a call with me at https://www.clarity.fm/davidbarnett  

Stop missing my videos and other news. Join my email list here: https://www.DavidCBarnettList.com   

An old fashioned way to borrow and save with no fees or interest

Hi everyone, here's a peek at some low-tech finance...

Recently, while I was away on vacation in Mexico, I learned of a family who participated in a 'savings ring.'

This article appeared on one of my feeds the other day and it describes the system.  In the case of people from West Africa, it's called 'sou-sou.'

A group of people commit to paying into a pot for every given time period, i.e. a month or bi-weekly.

Each time there are contributions, one member of the ring takes all the money.

The ring is held together by social obligation and the relationships between the participants.

For those who take the money early on, it's an interest free loan, for those at the end of the cycle it's a savings program.

Read more here at this article.

http://thegrio.com/2011/05/20/sou-sou-black-immigrants-bring-savings-club-stateside/#LxeypcOz3fDsBdWv.03

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[AUDIO] Loan updates and financing the painter's receivable

I give an update on the loans I did over the last few months as well as discuss financing the receivable of a painting contractor.



InvestLocalBook.com is the blogsite for Invest Local, a book about local investing deals such as loans, leases, inventory financing, receivables financing and more to small businesses and people.

PayPal introduces its version of Merchant Cash Advance in Australia

In yet another demonstration of how needy small business operators are for capital, PayPal has announced it will expand its lending services to Australia.

This service has been available in the US for some time.



Basically, the merchant can borrow up to 8% of their annual PayPal revenues and apportion a percentage of their future receipts through PayPal to pay off the debt.

Typically this type of financing is very expensive for merchants (see my post and video about Merchant Cash Advance here) and it shows that there is a market and a need for SMEs to borrow and a willingness to pay above average rates.

If you have capital to invest, you should be looking to Invest Local.  Buy my book to learn how.

Here is the link to the full article:
http://www.itwire.com/it-industry-news/market/65807-paypal-financing-open-to-australian-small-business

[AUDIO] Liquidity Risk in non-amortizing loan deals

Buzzing Ends at 33 Seconds.

I discuss an opportunity that one of my friends has to buy out a mortgage investment and discuss the pros and cons of the potential deal.  I talk about Liquidity risk, just one of 9 types of risk that are dealt with in my book; Invest Local.

Enjoy


InvestLocalBook.com is the blogsite for Invest Local, a book about local investing deals such as loans, leases, inventory financing, receivables financing and more to small businesses and people.

[VIDEO STORY] Sell a partial interest in a note to reduce risk

In this video I explain how I used one of the leverage techniques from Invest Local to reduce my risk in a small loan to a startup company.

Sometimes partial sales can attract capital gains tax issues.  In this case it doesn't.  Watch to understand.

Read Invest Local to learn how you can do these types of deals yourself.

[VIDEO STORY] The only unsecured business loan I've ever done

I tell the story of an unsecured business loan I made to a pizzeria and the steps I took to ensure that I would get paid.

Not for the novice local investor.

Learn more by reading my book.  Buy a copy here: https://gum.co/quoB

[VIDEO] Buying equipment with a loan vs. leasing for small businesses (not a tax discussion)

I discuss why I prefer equipment leasing over borrowing to buy equipment for a small business.

Also a great example of when terms are more important than price.

[VIDEO] Using free tools like Google Docs to track local investments

This is a follow up to the story about the young couple who I made a loan to for a medical device and debt consolidation.

I show how I use free tools like Google Docs to keep track of the investment and why it works so well for the borrower as well.

Enjoy



The original loan background story can be viewed here:

[VIDEO STORY] A recent personal loan deal

Small Business Lender Reveals biggest reasons why small business loan applications are declined.

I asked my friend Florence Rose to write a short guest piece on why she declines some of the applications she receives.  This brief glimpse of what goes on in the underwriting process of an institutional lender can give us all great ideas if we ever consider making our own investment into a small business.

Why decline a loan application?  

I grew up in a world of Entrepreneurs. It is what I know.  I breathe, eat, sleep and drink entrepreneurship.  All of my post-secondary education is focussed on every element of Small Business Entrepreneurship and Entrepreneurial Finance.  

 Why do I turn down loans?

 My compensations are partly driven by financing successful businesses and contributing to a strong economy.  Throwing money at businesses, that in my experience will fail, does no good for anyone.  No good for the entrepreneur, the financier, or the economy.  I want to contribute to a healthy economy.  I want to finance Entrepreneurs who will be successful.  My instinct is dead on, as is my education which contributes to good decision making.

 Why do I decline loans?

 1.       Poor credit and lack of investment – All research about loans of $250K and under are conclusive; if you don’t manage your personal credit well, you won’t manage your business credit well.  If you don’t pay small bills on time, you won’t pay me on time.  If you haven’t managed your personal wherewithal you will not apply sound judgement to your business.  It is one in the same.  

2.       Managerial Incompetence or Lack of Cross Functional Management Team – Just having functional expertise is NOT enough.  I can be a great plumber but if I don’t have small business management skills, I won’t make it.   Being a functional expert is NOT enough.  Either you are great at administration (the other half of business) or not.  If you are not, you have some options.  First, partner with someone who has the ‘other’ functional expertise in business.  Second, hire a great consultant to address your education gaps.   Third, stay employed at your current job.  Sometimes a great plumber is just a great plumber.  Not always are they great Entrepreneurs.  Be smart enough your strengths and weaknesses.

3.       You run out of cash – Cash is King.  If you don’t have #1 or #2 under your belt, then you will have challenges with your billing, collection, and payment of cash.  Again, don’t drive the Porsche if you don’t plan to fill it with high octane gas. 

4.       No market – You might have a great idea in business, but if there is no-one to sell your product/service to, you can’t generate cash.  Don’t over estimate your market if you are starting a business.  If you are sure you have clients to purchase your product/service too, get them to put it in writing.  These sales can be used as the basis for your cash flow forecast.

5.       Make a solid business plan with SMART objectives – Specific, Measurable, Achievable, Realistic, and Timely.  Know who you are, what you do, how you will do it, and make sure your operating plan is congruent with your strategic plan. 

Florence Rose is a small business credit specialist and can be reached at florence.rose@bdc.ca  Florence helps entrepreneurs in Southeastern New Brunswick, Canada.

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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.

Mel Jones

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

[VIDEO STORY] The Bus Buyer

I tell the story of a guy who spent years trying to get a loan to buy a bus.  What went wrong and why wasn't he achieving success?  Watch and see...

I did an interview on Friday for FTM Daily radio show. Great Episode!

I had the great pleasure of being interviewed by FTM Daily on Friday.  Great episode.

To learn about these and other strategies, buy my book!!

Small businesses need investment and will pay big %%%

I came across a great news article from PBS which described the rise of alternative small business lenders online.

This is a great article because it reinforces several of the messages in my book; Invest Local.

1. There is a need for financing choice for small businesses.  Bank loans are too complex and many are rejected.
2. Small businesses need capital and want to borrow for upgrading or adding productive assets.
3. Small businesses are willing to pay great interest rates to obtain this financing.

In some of the feedback I've received about my book, investors who are used to traditional 'retail' investments say they don't believe that its easy to get returns of 9% to infinity using some of the strategies I detail in the book.

This news article demonstrates how and why there are tremendous opportunities out there.

Please take a moment to share this blog with others and if you haven't already, BUY MY BOOK!

Enjoy.