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Home > Tools and Resources > Ask the Expert > Determining How Much Business You Can Afford

Determining How Much Business You Can Afford
Exploring SBA financing options

By Richard Parker | Diomo Corporation
Contact Richard Parker | Visit Website | About The Author

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Question:
I am interested in buying a business that is for sale for $2 million, with annual earnings of $500k. I am planning to use $500k in home equity for the purchase, but the seller is not willing to offer financing. What are my odds of being able to come up with financing for the $1.5 million balance? I'm told the SBA is my best option.

Answer:
Although I do not know many of the additional details regarding this business, it is likely that your best option will be an SBA backed loan through a traditional lender. While the SBA itself does not make loans, they guarantee up to 75% of a loan that a traditional lender will make under the SBA's 7(a) program. The maximum loan amounts change periodically and today they're at $2,000,000 which works well for your situation.

As I'm sure you can appreciate, there are numerous conditions attached to SBA loans and some points to note about them which are as follows (see also the SBA website: http://www.sba.gov/financing/sbaloan/7a.html)

 

There are number of articles in the buyer section of this website that deal with financing a business purchase, SBA loans and other options. It is well worth you reading them all.

Get more expert advice in Richard Parker's How To Buy A Good Business At A Great Price - the most widely used reference resource and strategy guide for buying a business.

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About The Author
Richard Parker is the author of: How To Buy A Good Business At A Great Price, the most widely used reference resource and strategy guide for buying a business. He has purchased ten businesses in his career and has helped thousands of prospective buyers worldwide learn how to buy the right business for sale. He is also founder and President of Diomo Corporation - The Business Buyer Resource Center.

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