One banking leader recently said to me “We have money to loan but not the right combination of strong business and strong buyer.” Of course what with the economy and all….
But, does that mean that there are no options? Of course not. Here are just a few:
As a broker, I am very up front with sellers that they are likely going to have to finance, typically 2/3 of the transaction. None of them want to unless they have spoken with their CPA who has pointed out some of the advantages to financing – higher interest earnings and reduced tax exposure. And we can all relate to the risk of investing in stocks. Is the risk of financing the business you built any more??
In New Mexico, there are other options to consider. In fact, it seems financing small businesses through state sponsored methods is something New Mexico IS really good at.
Check out these sources of information or funds:
Finance New Mexico & partners
Accion New Mexico
The Loan Fund
Wesst
It is important to explore each as they have different processes, requirements, focus areas.
Also know that it is not only purchases of businesses but operations of an existing owner that can be financed. Like many alternative lending systems, these are not unsuccessful.
I have been living in Santa Fe, with my husband of 27 years, since 2002. It is the perfect place for us. We love the environment from the mountains and desert to the people, food, and art.
What the banker didn’t say is what is meant by a “Strong Business” or “Strong Buyer.” I have long understood this to mean that the business itself has large amounts of free cash flow fo debt service and a clean balance sheet with securable assets. In addition the borrower has to have a pretty good FICO credit score of maybe 750 to 850.
Bank lending, due to recent regulatory changes, has become a mechanical process ruin through the computer against the regulators criteria for a “good” loan risk.