Going To The Wrong Lender For Financing A Business Purchase

I had a rough week this week. My buyer got turn down for his loan, because the underwriter at Wells Fargo said that the Service Station was over priced, and he thought I should be making more money.

Wells Fargo's deal:
Price $1,860K + Inv
Down $600K
Loan $1,360 + Working Capital & Inv.

The underwriter also felt that I has hiding the profits. The underwriter believe that the station could not carry the debt. The station has adjusted net $403K. EBITDA alone of $237K and my salary was $85K, plus some other thing like auto, etc. Unfortunately, I believe this was caused by a couple of factors.

1) I believe that the underwriter did not really understand the service station business. He thought that because my station had $7MM in revenue, it should have more than $400K in net profit. This shows some a lack of understanding of the service station business.

2) My buyer did not take the time to prepare a business plan and understand the information I was giving him. He thought he could just feed his bankers my P &L's, Tax Returns, and other information without any prep or business plan and get approved. I don't even think he gave the bank my restated earnings. Big Mistake!

To fix this problem I showed my buyer four other bids that I received that was within $50k of his bid (one of which was higher than his), and I spent a day at his house helping him with a business plan, projections, and bank applications. My Buyer is committed to getting the station and is preparing to apply to multiple banks. I don't like helping the buyer this much, but he needs a lot of help.

I meeting him tomorrow to review what he has, I will keep you posted.