Purchasing a business with a conventional loan requires that the entrepreneur do his homework and hammer out the numbers before engaging lenders. This includes being able to easily address questions that the bank might have about the business being considered for purchasing. When seeking to buy another business, it is essential you know as much as possible about the operation. In addition, you must sell your knowledge to the loan officer by effectively putting it all into a purchasing another business context.
Instructions
1. Put together all the financial documents that will be required to buy the business before meeting with the conventional loan officer. This includes your business plan for the business you are looking to buy showing what you plan to do with the funds, cash flow projections to demonstrate your capacity to pay back the loan and a statement of your personal net worth.
2. Practice and master the sales pitch you will use to acquire the conventional business loan. Anticipate the questions that will be asked. This requires that you know your proposed business plan cold. When rehearsing, know that the main mission of that meeting for the lender is to assess the risk of this venture. Keeping this in mind will allow you to be better prepared to address questions like how you plan to be profitable and how you plan to increase the business's market share, as well as demonstrating that you have the human resources in place to successfully implement these tasks when you buy this business.
3. Meet with the lender to present your case. In addition to discussing your business plan, be ready to go over your expertise and experience in this particular business area. Also, the lender will ask how much of your own money will be invested in the business. Lenders do this to assess your commitment to the business, so the more money you can put in, the better from the lender's perspective. Putting in a lot of effort into preparation for the meeting with the lenders will go a long way in being able to secure a conventional loan to help you buy the business.
4. Make sure to talk about the size of the market your business will be targeting, as well as your company's growth projections. This is where you must be specific and clear on just how you plan to acquire new customers to support market growth. Show the lender how this business's product and/or service is better than your competitors' and how your marketing plan will differentiate it for the new customer. Essentially, you must sell the lender much like you would sell new customers.
5. After presenting your business plan in detail, end with a summary of the plan. Make sure to concentrate on any questions the lender might have brought up in order to ensure them that your business will indeed be profitable and credit worthy. Doing all these steps in a professional manner will give you the best chance of landing the conventional loan to buy the business you have identified.
