In today's tough economic environment business acquisition financing - always tough to come by - has become extremely problematic.  Many buyers thing they can simply go to their friendly banker to get a loan - much like they done previously for a car loan or a home loan.  If that's the plan you are considering, think again.  Most small business acquisition transactions involve a significant amount of "goodwill." or business value not supported by the hard assets of the business.  For that reason, traditional bankers will shy away from your deal - if they have to foreclose they have nothing tangible to secure their loan.  The last thing they want to do is run your business in order to get their loan repaid!

For that reason, there are only three avenues worth pursuing if you want to finance your transaction: a loan from friends and/or family; owner financing; or acquisition financing through the SBA.  All three avenues require planning and a well thought out business plan.

Friends and/or Family

I've seen this form of financing done, but I have also seen it backfire and cause considerable hard feelings. Even the best laid plans can backfire and cause many an uncomfortable Thanksgiving for years to come. If you get an acquisition loan from your friends or family, make sure you have identified a viable business with a significant track-record of achievement and positive financial history.

Seller Financing

This is one of the best vehicles for business acquisition financing.  It's available - today it may be the only way for an owner to sell his business. It's flexible - there are no rules and if it makes sense for both buyer and seller it can get the deal done. Best of all, it provides security - to the buyer it demonstrates that the seller has confidence in the future success of the business.

Even with owner financing, the buyer should expect to provide 20% to 50% of the transaction price in cash at closing - it's never realistic to expect a seller to provide 100% seller financing.

SBA

As a result of the Stimulus and other government programs, loans guaranteed by the Small Business Administration are more attractive and often provide the only realistic alternative for third-party financing.  To begin, this listing provides contact information to those lender in Kentucky who are most active in SBA loans. There are others, but it's best to start with those who have demonstrated that they can get a deal done. Be aware that there is a time-frame associated with obtaining an SBA guaranteed loan - on of the knocks previously on the program was that it was too cumbersome and took to long.  You can condense the time considerably by been fully prepared to provide required documentation on a timely basis.  This checklist will provide you with a thorough outline of all that will be required of you.  To get you started, I'm providing an application, personal history, and personal financial statement.  All will be required and if you come with these already completed, you'll be well ahead of the game.

I hope this information helps!