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I am a proud co-founder of a small, successful retail store with a very loyal customer base. We opened doors in April of 2006. In October of 2007, the other co-founder unexpectedly passed away. I have sweat equity, experience and personal property invested in the store and some cash, but the store was willed to her husband because it is a sole-prop. We have been open and successful since her death, but her husbands heart is not into it. I am currently researching my options and seeking to buy him out. I am motivated, putting in place new concepts and processes to maximize our exposure and sales. Through negotiations, I have even secured a new, MUCH BETTER and LARGER location for less rent than we are paying now. If I am not able to acquire the store, then we will have to close soon. All of our customers will be very disappointed. It's a shame too because we barely have any competition!
Soooo... What I need is to tap into this huge network to see if anybody can share advice, tips and information. I have looked into Angel Investors and other funding sources, but still need better direction. At this point, I think I could acquire the store for $50,000 which in the grand scheme of things is a drop in the bucket.
If the husband does not have an immediate need for the cash ask him to finance the purchase... basically you sign a note for the $50k with an agreeable rate/terms and make the payments to him... each payment gives you more equity and him less... upon final payment he's out and your are in...
A lot of small business owners use this option to let one owner exit and the other take over.
Probably is your cheapest and easiest method (assuming he's a decent guy and you have a good attorney)... if you do go this option, try to get him to gives up all ownership rights on the signing of the note so he is just a debt holder... this way if you have problems with him down the road, you are only dealing with a lender and not a co-owner...
What I'm hearing is that it's normal to transfer this way. I would STILL prefer to have him totally uninvolved, which is why I am researching investors, but what I am finding is investors are really more interested in "technology" ventures. Wish me luck!
You can still have him totally out from an ownership perspective, by having all ownership transfered to you upon sigining the note... then he is just a lender.
Most angel investors while they will give the money, it generally is not a loan - they end up with equity in the company... generally that equity percentage can be high since they are taking large risk..
End the end you would most likely own and control more of the company if you use a traditional loan (either the previous owner as the lender or a local banker that you have an excellent relationship with).
Because the business is "Retail," the operation receives it's revenue from the public. As such, and if most of the revenue is paid by credit card, then have th original owner take out a "Loan" and repaid from a percentage of the future credit card transaction. (The "loan" is paid to the original owner as payment for the company. The "Buyer" then uses future cc tranasction to repay the loan). Once the "Loan" is repaid, the buyer now owns the company free and clear. Note: On this type of transaction, there are several CC related companies that will loan against future CC sales as long as the business uses CC and is a "retail" business. In this case, using a CC loan is perfect for this situation as listed above.
Last edited by Blazer19; 01-20-2013 at 11:13 PM..
Reason: Wanted to add support information aboout CC loans
If the business is genuinely making a good profit, you should be able to get a SBA loan. Small Business Administration loans appear to be available at any bank that does commercial lending.
You don't say where you are located. If you are in the PNW, Home Federal does SBA loans.
Allow me to point out that if the business is worth $50,000 and you wanted $50,000 from me, I'd own the business 100% and you would be out.
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Thanks!
