Business Purchase Budget with Available Capital

by a searcher

2 months ago

Hello everyone,
I'm a self-funded searcher exploring my capacity to acquire a business. While I understand that underwriting largely depends on the specifics of the business in question, I’m trying to get a rough idea of what size business my capital can support.
Here’s a breakdown of my resources:
- $100,000 in cash designated for a down payment
- $100,000 in additional cash and investment accounts
- $150,000 in home equity
Some additional details about me:
- 30 years old with an 800 credit score
- Annual income of $160,000 (not including my spouse’s income)
- Professional background in financial services and middle management in Big 4 consulting
I'm planning to use the $100,000 for the down payment and am assuming a 10% seller note. What scale of business can I realistically afford?



I've received an “estimate” from a lender that caps me around 600k business price with 20% down and requires additional 10% in reserve.

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3 comments

professional from The University of Alabama - Culverhouse College of Commerce and Business Administration

Assuming by “afford” you just mean to qualify for. In this case, You could max out the SBA $5mm limit. It’s situational for sure, but a 10% seller note will let you get into a business with very little (relatively).

With the new-ish SBA guidelines we’ve been able to close acquisitions with 0-5% coming from the buyer. A solid business and relevant experience speak more than cash.

I’d be happy to discuss

2 months ago | like reply | 0 likes

lender from Eastern Illinois University

Great question. You have provided a lot of details here but still not everything we would need to assess such an opportunity. But if I were talking conservative numbers based on the information provided and assuming an SBA loan structure, and also assuming you only wanted to put $100,000 down, having that be a 10% down payment would allow you to do an acquisition of $1 million. If you have a seller note on full standby for two years and we can get a deal done with only 5% down, you could do an acquisition of $2 million. That of course assumes the business cash flow supports a deal with less cash down. If you plan to raise additional equity or put more cash down you could certainly do a higher loan. We have gotten even larger deals done for individuals with less of a net worth than you have so long as they could come up with the required down payment. It appears to me whomever gave you the initial quote on what they could do was requiring way more equity than would typically be required.

Happy to get on a call to discuss options and work to get you pre-approved. You can reach me here or directly at --@----.com Good luck.

2 months ago | like reply | 0 likes

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