A potential client who is going in with other partners to buy a coin laundry had some questions for me the other day that pertains to going into a transaction with partners and involving business purchase financing via a SBA loan.
Here are his questions and concerns:
"We have five partners that are interested in purchasing a coin laundry business in LA. One partner lives in LA and has managed a coin laundry facility in the past. He will handle the operational duties. The four remaining partners live in Phoenix and will put up most of the capital. I don’t know if you need this info but the four Phoenix partners have credit scores of 750+ and the LA partner has a credit score above 700.
Assuming we purchase a $400,000 coin laundry business with no real estate, the collateral for the loan will be the 20% down payment plus the appraised/salvage value of the FF&E. What will we have to do for the remaining loan amount that is exposed? Will we have to collateralize the difference with personal assets such as real estate, etc? Or, since we have good credit and previous industry experience, can we sign a promissory note or personal guarantee?"
First of all most of the "partner" oriented buyers I deal with never end up buying a business. After they look at the businesses and "divy" up the potential profits, it doesn't really make sense to invest. But, if you are determined to structure your deal this way you should probably have 1 person be the "main partner" and fill out all the paperwork/forms and the others would be limited partners - under 20% ownership total on the deal - and then they don't have to complete any financing paperwork.
You will still need to sign a personal guarantee on the note as the lead investor. Just a note on coin laundries - most of the deals that have been presented to me are lets say "very creative" on their tax returns - they hide alot of income! Thus, they usually aren't eligible for business purchase financing.Technorati Tags:
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