Types of Financing Seller Financing
Seller financing for qualified buyers is common in the acquisition of closely-held companies. This type of financing is a vote of confidence to both the buyer and financing institution. Seller financing is usually structured as a term loan and follows a unique financing structure: • The seller only pays tax on the down payment and not on the note amount.
• The seller gets a good return on his or her money and a nice monthly income.
• Seller is protected because he or she gets monthly P&L, Balance Sheet, Right to Offset, etc.
• If buyer gets into financial trouble, the seller already knows because of the monthly reports.
• Together they work out the problem; the seller potentially does not receive a payment or two, but business continues.
• Business continues, buyer’s down payment is safe and seller's note is safe.
• Employees jobs are safe, creditors are safe and clients continue to receive goods and services SBA Loans
There are many advantages to owning your own small business. Not only will you enjoy the challenge and freedom of being in charge of your own company, but you will also have many avenues of support to guide you along your journey.
The government operates the SBA (Small Business Administration) as a way of promoting and expanding the strength of small businesses. By acting as guarantor for low-interest, long and short-term loans, the SBA can help you buy a business in today's competitive lending market.
If you are interested in obtaining a loan for your small business, the SBA can work with you and your preferred lending institution to make it happen. Commercial banks, community support organizations and microlenders are all there to help you gain access to small business loans with the SBA as guarantor.
With SBA small business loan programs, the SBA sets lending standards to match your small business financial needs and your lending institution administers the loan according to these standards. While commercial business loans may be impossible to back with your initial capital investment, SBA programs provide the credit necessary to ensure that your business venture is a success.
The SBA's many loan programs are designed to assist with your small business loan needs. The basic 7(a) guaranty is the main program by which small businesses can gain access to loans they might not otherwise be able to receive through commercial lending institutions. Basic 7(a) guidelines allow you to use the loan to invest in equipment and machinery, to acquire land and cover building expenses, to spend as capital, and, in some cases, to cushion accrued debt and allow you to continue running your business for eventual profit. Depending on your spending needs, repayment plans can stretch up to 25 years.
Small businesses with more specific loan needs can find a version of basic 7(a) tailored to match their expenses. These may include small business loans that are meant to provide your existing business with the necessary assets to expand or improve, and to purchase real estate.
Microloans, SBA's 7(m) program, allow you to receive short-term small-business loans in small amounts, up to $35,000. These loans can be used to help with immediate cash-flow needs as well as buying supplies and equipment to furnish your small business. Microloans also ensure that your local lending institution will assist you in producing and managing your financial plan.
Most small businesses receive startup funding from their owner's personal assets, along with assistance from family, friends, and business partners, as well as high-interest credit advances. SBA loans make it easy to gain the capital you need to run your own business, without the danger of high-interest debt piling on your personal accounts. By acting as a guarantor that supports your interests, the SBA makes small business loans work for your company. Retirement Funds
Did you know you can use your 401K or any other retirement funds for buying a business without paying taxes or penalties? Many individuals have the necessary down payment to buy a business in their retirement funds. Typically, every dollar of down payment is equal to a dollar of annual business earnings. In other words, if you can come up with $250,000 from your retirement funds, you can put down $250,000 on a business that makes $250,000 per year (remember to not deplete all of your funds on the down payment, keep out a few dollars for operating capital).
Tax laws in America prevent savers from dipping into their 401K, IRA, profit-sharing or annuity plans. In fact, in many states, you'll lose more than 50% of your funds in taxes and penalties, just for accessing the rainy-day savings you've worked so hard to accumulate. A program is available that provides a legal and simple approach to help you acquire down payment money with your savings. The program allows you to release the money in your retirement funds and use it for buying a business - without penalty and without taxes. The program was started specifically to help people like you acquire the financial freedom of owning a business. You can use the money to purchase a franchise, buy a business or start your own entrepreneurial venture. And you won't lose a penny by doing so. Hundreds of individuals just like you have benefited from the services to start or buy their own companies using their retirement funds, without distributions, penalties, taxes or the use of loans. Sunbelt Business Brokers has formed a strategic alliance with a company that has developed a way to legally move money locked in 401(k) or other IRA rollover accounts directly into new or established businesses without distributions, taxes, penalties or the use of loans. The many may be used for franchises, property, equipment or working capital. If you have funds that are locked in a retirement fund, we can access those funds to help you realize your dream of buying a business through our relationship with this company. Please ask your broker for more information on this process. Equity line
Did you know you can use your home equity to buy a business ? It is much easier to borrow from home equity than going through a business loan and interest on an equity line is deductible on your personal tax return. Most SBA loans require you to put your house as collateral and another option is to to borrow money against home equity to buy a business. Loans from friends and family
Approaching family and friends for funding can be an easy and flexible route to finance. Approached in the right way, this type of funding can provide a fast, affordable solution to your loan requirements.
Benefits
Friends and family are more likely to be able to offer you a low interest loan, or one with no interest attached at all. They will probably consider lending over a longer period than conventional sources and may be willing to adjust the terms of the loan. As people who know you well, they will also be a good judge of your character and are less likely to need a detailed business plan from you.
If you have been turned down by conventional sources, consider whether you should approach your friend or family member for a loan at all. Be open about why these sources may have refused you credit and emphasize to the family member or friend that they should not lend more than they can afford to lose.
Avoiding problems
Relationships are at stake if problems arise with an informal arrangement. This problem can be avoided by getting some professional advice before you approach friends and family for funding. Also, a well thought-out business plan will give the lender a better understanding of the expectations for your business and how their money will be put to use. Be open about the risks involved and outline worst-case scenarios.
Draw up a formal agreement between both parties involved. Establishing terms of the loan in writing will avoid the misunderstandings that often arise as a result of verbal agreements. Include any tax implications for both parties.
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