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Old 12-09-2014, 12:01 AM
 
78 posts, read 46,409 times
Reputation: 32

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Here's the short of it. I worked in my parents business from the time I was a kid until 19 months ago when my mom and dad sold it and moved to FL to retire. Since then I have been working in a restaurant as a server/bartender. I know the business that my parents ran quite well ( it was a corner store type of place with cigarettes, some groceries, toiletries, beer etc. and I basically worked solo in there after school for 10 hours at a time and then all day after I left High School. It didn't make us rich by any means but we had a good enough living to buy a house in a nice suburb, go on vacations, get a new car every couple of years plus get both of us kids used ones when we got our licenses and pay my sisters college tuition. It is definitely an immigrant business (they were fresh of the boat from Europe and it seems that most owners now are f Middle Eastern or South Asian/Indian descent) but I know it well and I have my parents to advise me. My thing is that I don't have much start up cash, my only "on the books" employment history is restaurant work, and since I have never had a credit card (I don't like debt, and prefer to use cash because it is harder to overspend when you have to count out hundreds of dollars as opposed to swiping a card) I don't really have a credit history. I am 24 with no college and although I make a decent amount of money in the service business, this isn't the type of thing I wanna be doing when I'm 30 or 40.

I have some money saved up and I am planning on relocating to a different state where the weather is better and my views match local/state politics. I browse business for sale websites online sometimes just to see, and I found a business for sale in the same field that I know (basically a grocery/corner store/convenience store type deal) that had a nice turnover and net profit posted. Additionally, it said "Owner Financing Availiable"

My question is: what exactly is "owner financing" is it a similar concept to "rent-to-own"? It seems like a great alternative for someone like me who is knowledgable about running the type of business, but couldn't qualify for a bank loan for whatever reason.

Can someone explain the concept, and pros/cons of "Owner Financing" to me?


Obviously I won't be buying THAT business posted online because I am not ready, however I would like to know if it will be a good option for my future.


Thanks!
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Old 12-09-2014, 05:27 AM
 
Location: Los Angeles (Native)
24,151 posts, read 13,668,407 times
Reputation: 11364
This explains basically what owner financing is

How to Buy a Business With Owner Financing: 9 Steps

Basically you would find a business for sale w/ owner financing. You would negotiate the down payment, terms of the loan (length of loan, interest rate,etc). If you default on the note , the owner can take back the business.

Also regarding the bank loans, banks are notorious for not loaning for small businesses.

There are also SBA loans you might want to explore , terms and down payment may be loans, but there is going to be a lot more paperwork involved.

You can take a look here
https://www.sba.gov/loanprograms

Worth exploring options even though you aren't in a position to buy a business right now.
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Old 12-09-2014, 08:47 AM
 
Location: East of Seattle since 1992, originally from SF Bay Area
28,386 posts, read 50,582,032 times
Reputation: 28616
Not at all like rent to own normally, though a creative seller and buyer could always work out that kind of agreement. When I bought my business in 1992, the owner offer to carry a loan at 8% for 5 years with 20% down. He also offered a discount of about 20% for cash, so I opted for the latter. With a monthly payment to the seller in addition to the rent and other expenses means lean profits until that loan is paid off. That's not the kind of business where you can make dramatic increases in volume of sales.
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Old 12-10-2014, 07:09 PM
 
28,906 posts, read 45,202,743 times
Reputation: 45815
I'm in the process of buying a business. Instead of an asset sale, I am buying the intellectual property and paying him a percentage of the AGI, with the percentage diminishing over the next three years. No risk and I can walk away at any time.
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