Summary

In this video, I'll show you how to buy a business with a loan in seven easy steps. Whether you're a first-time business buyer or not, this guide will help make the process easier for you!

1. Check YOUR Eligibility Credit Scores – 680 or higher Personal bank statements Business / Personal Tax Returns – 3 Years Financial statements for any other businesses List of personal debts, including amounts owed, monthly payment and payoff date Down payment 10% to 30% - Proof of Funds Reach out to 3-5 Lenders

2. Search for a Business Find Something NDA, Get the CIMs It’s a nice business Its Consistently Profitable You like the SDE You could see yourself doing it

3. From Broker/Seller, Ask for: Income Statement 3 to 5 Years Cash flow statement – (2) 10/21/21 & 10/21/22 Balance sheet – (2) 10/21/21 & 10/21/22

4. Does Business Qualify for Financing? Is the business a Financially strong business Debt Stress Test DSCR 1.2 to 1.5 Does the business have solid financials? Is the business domiciled in the US? How many years has business been in existence? Has the business model product offerings changed?

5. From Seller, Ask for: All Business bank account statements Complete list of business assets Information on outstanding business debts Business lease Organizational documents for the business; articles of incorporation Business licenses

6. Buyer Submits to Lender Business plan Letter of Intent (LOI) Cash flow projections Professional business valuation Financials - Quality of Earnings Report Everything you asked from (Seller Financial Report Cards)

7. Lender Underwriting Bank issues term sheet Bank Performs Underwriting Denied Approval Needs More Bank issues commitment letter Sign Purchase Agreement Close #sba

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Transcript

Jon Stoddard (00:00.152)
How to buy a business with a loan. So these are the seven steps. Number one, check your eligibility. This is all on you. So there's a couple of things you have to do first. So what is that? You need a credit score or 680 or higher, and that's on all of them. If you don't have that, look at my link below. We can help you with that. You need your personal bank statements all together. You need a business, personal tax returns, three years all together.

financial statements for any other business that you're running, list of debts, personal, including amounts owed, monthly payment and payoff date. Get all that together. Down payment, 10 to 30 % and a proof of funds. Do you have that? If you don't have that, of course you're to have to go raise that capital or find partners to help you do that. And you're going to start reaching out and a list of three to five lenders. Start talking to them now. Tell them who you are.

What you're trying to do, start that relationship. Number two, you're going to start searching for a business. You're going to find something. You're going to send an NDA. That's your confidential information memorandum. And you see, hey,

It's a nice business. It's consistently profitable. You like the seller discretionary earnings, which is the SDE, and you can see yourself doing it. You'd be proud to talk about it to your wife. Number three, this is what you're going to get from the broker. You're going to ask for income statement, three to five years cash flow statement. You're going to ask for two of those. It's like a snapshot. So 10, 21, 21 and 10, 21, 22.

You're going to compare the two together. Business balance sheet. Same thing. You're going to ask for two. 10-21-21 and on 10-21-22. You're going to compare the two. Number four. Does the business qualify for financing? The last thing you want to happen is to have your letter of intent. You send it out. It's accepted. But unbeknownst to you, the business does not qualify for finance. Let's take a look at what you need.

Jon Stoddard (02:10.285)
Is the business financially a strong business? Can you do a debt stress test? Debt service coverage ratio 1.2 to 1.5? Can the cash flow handle the debt? Does the business have solid financials? Are they clean? Are they from QuickBooks or FreshBooks or some other financial package? Is the business in the US? How many years has the business been in existence?

If it's only been one or two years, it's probably not going to be financed by a lender. Has the business model or product offerings changed? I worked on a business where they used to sell a product or lower cost product. They moved to a higher cost product and it was not financed by any SBA lenders I took it to. You find this business and you want it. You're going to send an LOI and the seller signs. What's next? Number five.

From the seller, you're going to ask for all the business bank account statements, a complete list of all the assets, information on any outstanding business debts, the business lease, organizational documents for the business, like the articles of incorporation, the business licenses, and then number six, the buyer is going to start submitting to the lender, the business plan, the letter of intent.

copy of you and seller sign, your cash flow projections, a professional business valuation, financials, or a quality of earnings report, everything you asked from the seller.

which are the seller of financial report cards. And then number seven, lender underwriting. And here's what happened. The bank issues a term sheet. Number two, the bank performs underwriting. only three things can happen. It's denied, approved, or needs more. C, needs more. I went through this myself where I tried to buy a portfolio of courses from a guy that was selling on Udemy. Even with my credit score really strong. So I had to bring somebody in. They became the president.

Jon Stoddard (04:11.023)
strengthen my financial position. The bank's going to issue a commitment letter. Everyone signs the purchase agreement and you close. So those are the seven steps to get a loan to buy a business. If you have any questions, leave a comment below. If you enjoyed this video, like it, share it, and tell other people about it. And thanks for watching.

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