Had one of my SBA financing - consulting clients (business buyer) contact me today about financing on a contracting company. This buyer has been looking to purchase a business now for over a year. He keeps getting shut out of bigger deals (over $2M in price) to private equity groups, so he decided to buy assorted smaller deals (in the $400K - $700K range) and consolidate them.
A great idea but, you still have to find the right business to get financing in place to do so.
The deal he brought to me today has adjusted net income amounts of : 2005 - $984K
2004 - $1.27M
2003- $1.692M
As you can see the numbers keep dropping in a pretty dramatic fashion. When I asked him about the number he went on, " well the owner got a divorce, then the partner he had went kind of off and then the key salesperson left, but now has come back . . . . . " after 5 minutes of detailed explaination I let him know that with the declining revenues on this deal and a story that all lenders would "kind of turn their head in that huh expression" - I let him know he needs to find some more deals to look at.
Bottomline, if total revenues or adjusted net income are on the decline especially more that 10% per year, your not going to get a SBA loan for business purchase financing - move on - look at other deals!•
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