Unique situation - business and land - Posted by Dan

Posted by ray@lcorn on August 14, 2003 at 17:53:34:


There isn’t enough information given to do much more than ask some questions to spur your thoughts…

Most important to getting a deal done with a small intial investment are the needs of the seller. How motivated are they? How much cash do they need? (not want, there’s a difference)

How about the original seller note of $145T? Would s/he discount for an early payoff? Is it assumable? What are the terms? Are they negotiable?

How about the nature of the business? Is there equipment involved? Any debt there? That could be a source of cash if it is the type of equpiment that a lender can fund and lease back to you. Of course that also depends on how much debt service the cash flow from the business could stand.

Which asks the question about the cash flow… how much? Is it an absentee ownership type of business? Will you manage the business yourself? Have there been any recent valuations (appraisals) of the business and/or property other than the asking prices?

How about inventory? How much is it worth and on what terms does it transfer?

Do any receivables come with the business? Receivables could be factored, at a discount of course, to access cash. They could also be left with the seller as a credit against the price. (If they do come with the business, be sure to discount the value for age, risk and collectibility.)

How about the property? Any existing debt there? If yes, is it a bank loan or private mortgage? Any discount available? Assumable? Is there any expansion potential for the property? What’s the immediate neighborhood like? What would it be worth if you had to change the use from the current business?

Just a few thoughts…


Unique situation - business and land - Posted by Dan

Posted by Dan on August 13, 2003 at 01:55:03:

Here’s the situation:

We have an opportunity to buy a long standing retail specialty business in a high traffic tourist area in California. Its well established with high foot traffic.

The business in on the market for $175k, with an existing private note from the original business owner of $145k.

Along with that, they are offering the property for $550,000. Its attractive because the prices in the area are rising fast, and will continue to do so for some time.

If I bought the two together, we could probably get them for $650k, since part of the value in the business price listed above is $50k in “leasehold value,” plus I feel that the seller would come down on the property a bit.

I’m exploring different options, including a) just buying the business, restructuring the existing lease, and waiting on the land, b) buying both, using the property value to get financing to purchase both the property and the business itself.

Looking for info from anyone who has ideas on how to do the transaction with little or no money out of pocket…we would want to reserve that for use in operating and improving the retail store and business.

Thanks. -Dan