Advice for Buying a Restaurant and Selling a Restaurant

Buying a Restaurant with Financing From Uncle Sam

Posted by Robin Gagnon on May 24, 2012 9:27:00 PM

Patriot Express LoanHappy Memorial Day.  It’s a time when we offer our sincere thanks to the service men and women that protect our freedom.   

It’s also a good time to look at Uncle Sam for financing your dream of owning a restaurant.  Veterans, wives of fallen soldiers, and even spouses of veterans have access to at least one strong government program to aid you in buying a restaurant.  The Patriot Express loan offered through the U.S. Small Business Administration is a pilot loan initiative launched last year.

The Patriot Express Loan is targeted at those who have served.  However, even if you’ve never made it to boot camp or held a rank in the military, you may still qualify for the program to aid you in buying a restaurant for sale.  That’s because, outside of traditional veterans and service-disabled veterans, any Reservists or National Guard member may apply.  Still not meeting the grade?  If you’re the current spouse of a veteran, Reservist, or National Guardsman, you also qualify.  That includes the widowed spouse of a service member or veteran who died during service or of a service-connected disability.

You can definitely use the loan for buying a restaurant since the use can range from start-up costs to equipment purchases.  Even business occupied real estate purchases qualify so some of our restaurants for sale with real estate definitely make the grade.  The loan can cover your inventory, working capital expansion and even setting up to sell goods and services to the government.   

According to their website, the SBA Express offers “streamlined and expedited loan procedures.”  You will receive a response to your application within 36 hours – yes that’s 36 HOURS, not days.  That’s important because timing is everything when putting an offer together and moving to closing on buying a restaurant. In addition, the Patriot Express loan features the lowest interest rates offered by the SBA for business loans ranging from 2.25 to 4.75 over prime depending on the size of the loan and the length of the term. 

Want more information?  Your local SBA district office will have a listing of Patriot Express lenders in your area.

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Topics: Financing a Restaurant

Buying a Restaurant with Crowdfunding - Angel Investors On the Way

Posted by Robin Gagnon on Apr 20, 2012 10:46:00 AM

Crowdfunding – we talked about it on our blog months ago and now thanks to the JOBS Act just passed, it’s closer to being a reality for those buying a restaurant and looking for financing

The Jumpstart Our Bdescribe the imageusiness Startup or the JOBS Act was signed into law by the President on April 5.   The message had bipartisan support with a 73-26 Senate vote and a 380-41 House vote. The purpose of the JOBS Act is to jumpstart a whole new way to loan money – from thousands of investors at a time – through Crowdfunding.

It’s exciting because that means someone buying a restaurant has an entire new way to borrow money.  Here’s how it works.  You post your cash needs online through a web platform. Then any interested party (the online “crowd”) looks at your idea and decides whether to invest.  It’s like pitching your idea of buying a restaurant to hundreds of thousands of angel investors at the same time and having them instantly transfer money to your bank account.

One expert in the arena of crowdfunding (Rory Eakin, founder of CircleUp, a crowdfunding platform) was quoted in Forbes Magazine saying, “Currently, less than one percent of U.S. small businesses receive Angel investments. By opening up restrictions around general solicitation and introducing crowdfunding…these investments create up to six jobs per investment.”

There will doubtless be an entire industry grown around this idea after all, there will be web platforms to develop, marketing pitches to perform and a lot more scrutiny if you’re looking for money.  But all of that is good news for those looking to buy a business and get a loan. 

The bill now moves to implementation with the Securities and Exchange Commission getting 270 days to come up with regulations around the concept. It’s a safe bet that there will be a LOT of safeguards to protect investors but we’re certain that restaurant investors will be lining up to take a look at the opportunities to help you buy a restaurant with this new form of loans.


Topics: Financing a Restaurant

Veteran Loans to Purchase Restaurants for Sale Atlanta

Posted by Robin Gagnon on Apr 3, 2012 4:00:00 AM

Veterans Financing for RestaurantsIn their last job, they were willing to take a bullet - literally.  That may be why the nation is beginning to respond with programs helping veterans seeking Florida, Colorado or Atlanta restaurants for sale that are short on funding.  Here are a few options:

SBA Patriot Express Pilot Loan Initiative

The U.S. Small Business Administration has a program titled the SBA Patriot Express Pilot Loan Initiative.  This allows veterans and members of the military community wanting to establish or expand small businesses to approach local lenders that will handle the loan with the guarantee of the Small Business Administration (read, the government) behind it. 

While you often think only of veterans from active duty or retired, many programs like the SBA Patriot Express include these categories along with reservists, National Guard members and spouses of any of these categories.  In addition, widowed spouses of service members or veterans who died during service or a service connected disability are also eligible.

Patriot Express loan proceeds can be used for most business purposes, including the purchase of a restaurant for sale Atlanta, Florida or Colorado.  Their loans will cover start-up costs, equipment purchases, business-occupied real-estate purchases, inventory, infusing working capital, managing your business, expansion, preparing your business for the possibility of your deployment, setting up to sell goods and services to the government and recovery from declared disasters.

Patriot Express loans feature the SBA’s lowest interest rates for business loans, generally 2.25 percent to 4.75 percent over prime.  The local SBA district office has a list of Patriot Express lenders in your area.  You can also ask one of the restaurant brokers at We Sell Restaurants who can provide you with SBA lenders handling Patriot Express loans.

 VetFran – an Initiative of the International Franchise Association

The International Franchise Association’s VetFran program offers meaningful reductions in franchise fees as well as considerable additional incentives.  Granite Transformations not only offers a 50% discount, but they will also finance the remaining portion over 12 months; Popeyes Louisiana Chicken not only waives the entire $30,000 franchise fee, but also offers a 3% royalty reduction for the first year. Kitchen Tune-Up waives the entire initial investment of $40,000; Maid Brigade offers a 45% discount on the franchise fee, territory fee and equipment package for a total savings of $27,900.

We Sell Restaurants participates in the VetFran program as a member of the IFA and offers a substantial discount on our We Sell Restaurants franchise to any veteran.

Sprigster.com

Sprigster is a crowdfunding web based platform for franchising.  Veterans post their stories online in video format and donations are offered to offset their costs.   Visitors pay through paypal to support a Veteran.

These three options may assist a veteran seeking a restaurant for sale in Atlanta, Florida or Colorado where we have listings or in other parts of this grateful nation welcoming home our veterans with some small help in financing their future.     

 

 

Topics: Financing a Restaurant

Buying a Restaurant with New Options, Crowdsourcing and Crowdfunding

Posted by Robin Gagnon on Mar 13, 2012 4:22:00 AM

Buying a restaurant may seem like a solitary venture but that may change as social media and the Internet attract crowds to ideas and move ideas to actions. 

What happens when lots of people contribute ideas or capital to a project?  TMoney to buy a restauranthat’s the whole idea of crowdfunding and crowdsourcing, two relatively new terms you’re going to hear a lot more about.  The question on our mind is whether it applies to buying a restaurant and the answer is yes.

Crowdsourcing is used to tap into online communities of thousands of people to create original products and concepts.  Can you use this idea to buy a restaurant?  At least one group (REO Eats, Lansing Michigan) did.  The owners decided on the location but every other aspect of the business; the name, design, menu, theme and pricing were all tossed out to the crowd for input.  Their website was a portal for “what should we do” instead of “here’s what’s coming.”  This made a huge splash on the Internet while it was in the planning stage but there’s not much information about the final restaurant concept.  

Another application of going to a “crowd” that may develop some momentum over time is Crowdfunding.  This approach allows someone buying a restaurant to raise capital for new projects and businesses by soliciting contributions from a large number of stakeholders.   

We are seeing a lot of activity around this model for non-profits and less for those launching a profitable enterprise but there’s legislation pending that could change that in the future.  Currently Regulation D, Rule 504 allows an entrepreneur to make an offer of securities to an unlimited number of unaccredited investors provided that the business is raising less than one million in 12 months, is raising from people who are already the entrepreneur’s friends and family (those with whom you have a “substantial, pre-existing relationship”) and follows state-by-state laws.  Since the point of crowdsourcing is that you’re not going to your local bank, family and friends or people you know, laws will need to change for this to reach a tipping point of use. 

On a non-profit basis, veterans have some options.  One website, sprigster.com allows features their boost a hero program.  Veterans that want to own a franchise can post videos, the size of their project.  Then online crowds respond with donations to help them realize their dream.

Buying a restaurant using crowdfunding is an idea that’s still developing.  We predict that within the next three years it will common to reach out using the Internet and social media to ask people in a crowd to fund your dream.

Topics: Financing a Restaurant

Restaurant for Sale Loans - SBA Lending and Buying a Restaurant

Posted by Robin Gagnon on Jan 5, 2012 4:16:00 PM

Do the terms “small business loan” and “buying a restaurant” belong in the same sentence? Yes, if you use an expert restaurant broker that does his work up front.

SBA Lending and Restaurant LoansIn the last three years there has been less access to capital than ever before for acquiring a small business like a restaurant for sale.  There are still options however and one source is the SBA loan program. The SBA is an independent federal agency created by congress in 1953.  They are mandated by Congress to aid growth and expansion of small business.  One element of that charter is the SBA loan program.  The SBA does not actually lend money itself. Instead, it insures against risk for banks in the event of a default.  They guarantee as much as 90% of a loan’s value for the lender. 

Here are a few of the items you should be aware of when it comes to an SBA secured loan. Most of this can be found online at www.sba.org.  If the following conditions can be met, the loan for buying a restaurant has a strong possibility of being funded.

The SBA program requires a restaurant have no less than three years, thirty-six consecutive months, of profitable operation.

The minimum books and records required will include both the tax returns and profit and loss statements.

Restaurant buyer requirements for SBA secured programs include all of the following:

1. The SBA will not approve any loan unless the owner is committed to finance at least 10% of the purchase price. 

2. The SBA program requires that a restaurant buyer secure the loan with a second mortgage on your home. This is not negotiable in any circumstances we have seen. If you refuse to pledge your home for collateral on your business acquisition, don’t try this route for borrowing.

3. The SBA program also requires that they lien the furniture, fixtures, and equipment of the restaurant you are buying.

4. The SBA program requires a minimum amount of business experience.

6. The SBA requires that that net profit per month with add-backs divided by the loan payment per month must be 1.25 or higher.

7. Key person life insurance is usually required. This can take up to six weeks to obtain.

8. 9. Both the spouse and the applicant’s credit history will factor into the loan approval.

10. Lenders insist on the seller and buyer both signing IRS Form 4506-T to protect against fraud. Both the seller and buyer face IRS trouble if the tax forms are false.

11. A business plan will be required by the lender as part of the SBA process.

12. The applicant for the loan must be a legal resident of the United States.

13. The credit score of the applicant must normally be above 650 and the restaurant buyer cannot have an arrest record.

14. The applicant for the loan must have direct management experience to be approved in most instances.

The bad news is that the requirements for restaurant SBA lending are stringent.  The good news is that if an expert restaurant broker has already submitted the business for pre-approval, it’s almost a sure thing to get the loan as long as you meet the restaurant buyer’s criteria listed above.  Once you submit your paperwork to the bank, it’s a fast track to closing.

In short, when restaurant brokers advertises that a restaurant has already been pre-approved for lending you can be assured that it is an A+ listing with excellent records and profitability.  The “pre-approval” portion of the lender work will wean out any restaurants for sale that don’t meet strict financial criteria.

Here's a listing offered by We Sell Restaurants that is Pre Approved for SBA Lending

Topics: Financing a Restaurant

Restaurant Brokers Explain Buyer Prequalification on Radio Show

Posted by Eric Gagnon on Sep 19, 2010 4:32:00 PM

Buyer pre-qualification is key when buying a restaurant.  Atlanta restaurant brokers share why they have a 90% closing rate when the industry average is 30%. Listen!

Why is buyer qualification so important when buying a restaurant?  Because both sellers and buyers are disappointed when deal fall through because the buyer can't meet the financial qualifications.  Atlanta Restaurant Brokers from We Sell Restaurants explains how they have a 90% closing ratio on all contract written because buyers must pre-qualify up front.  This saves time, money and effort for the seller and the buyer.  

Many buyers believe they can borrow funds on a restaurant and in fact, it’s very rare.  A buyer should be prepared with provide financial information up front for the landlord and the broker.  We have a 90% closing rate on contracts written while the industry average is only 30%.  It’s devastating to a seller to get a contract and then have it fall through because the broker hasn’t done his job up front.

We also discussed that we hired and trained three new brokers this week.  They went through We Sell Restaurants University and are hitting the streets next week to write deals and get listing.  Our new hires include talent from the real estate world that is transferring into commercial brokerage.  We also hired a Georgia State graduate with a degree in real estate.

There are brand new hot listings on the market in Atlanta.  Here are examples of two listings that we do not believe will last in this market.

One is a gourmet burger place right in Metro Atlanta.  It has a great lease and will be perfect to keep as is or convert to something else.  It’s $99,000.

Another is an Alpharetta restaurant for sale that is fully equipped  - this restaurant only 3 weeks new and on the market for just  is being marketed for just $29,000 for someone to take over assets

You can view details on all our listings live on wesellrestaurants.com.

Topics: Financing a Restaurant