Buying a Laundromat with SBA 7a Financing

Buying a Laundromat with SBA 7a Financing

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Hi Beau, I’m purchasing a laundromat in Florida. I’m buying the real estate for $400k and the business for $300k. The seller is going to carryback 100 percent of the business acquisition. The problem I’m facing is that the seller runs all of her personal expenses through the business. The DSCR will not work!

How can I get this deal done, Beau?
Thanks!
Jack

The episode discusses purchasing a laundromat in Florida using SBA 7a financing. The buyer, Jack, is acquiring both the real estate and the business, with the seller carrying back 100% of the business acquisition. However, Jack faces a challenge because the seller includes personal expenses in the business, which affects the debt service coverage ratio (DSCR) and cash flow.

Beau explains that this is a common issue, where sellers highlight the cash flow without providing proper documentation. To address this problem, he suggests identifying and documenting "ad backs," personal expenses that can be excluded from the business's cash flow. These ad backs need to be justified and supported with a paper trail. Beau mentions that it may require some effort to liaise with the seller's CPA and banker to obtain the necessary information. While documentation might be challenging, it is crucial for showcasing the business's income if Jack intends to sell it at a good multiplier.

Banks have varying appetites for deals; some may specialize in specific verticals like franchises. Therefore, it may be necessary to approach multiple banks to find the right fit for financing the laundromat purchase. Bo advises going the extra mile to provide additional documentation and working closely with the underwriter to address any questions or concerns they may have.

Buying a laundromat with SBA 7a financing can involve challenges when sellers include personal expenses in the business's cash flow. However, by identifying ad backs, obtaining proper documentation, and working with banks experienced in SBA lending, it is possible to navigate these obstacles and successfully close the deal.

The importance of having a knowledgeable team to navigate potential roadblocks when buying a laundromat with SBA 7a financing. The buyer typically needs three years of the seller's tax returns and an interim statement. They also highlight the need for buyers to thoroughly analyze the deal, including understanding the cost of goods sold and investigating other expenses to determine the actual value of the business.

Purchasing these deals may require some detective work, and recommends finding a banker experienced in such transactions. They offer assistance in navigating SBA financing, including 7A and 504 loans, and provide solutions for various financing needs such as startup businesses, franchise acquisitions, building new office spaces, or expanding existing businesses.

In conclusion, the episode emphasizes the importance of having a knowledgeable team and conducting thorough analysis when buying a laundromat with SBA 7a financing.

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Timestamps:
(00:39) - Beau's response regarding add-backs and documenting income for selling a business
(00:58) – You have to show the income
(01:00) – SBA allows you to find the ad backs in the paper trail
(01:52) - Navigating banks and finding aggressive bankers to close deals
(02:21) - The SBA lenders and their varying verticals and appetites for different types of deals
(03:40) – What do good buyers do?
(04:07) - Advice on understanding the deal and playing detective to identify potential roadblocks
(04:14) - Book a call at http://bookwithbeau.com/

💥 Thanks for watching 💥
#sba7a #sba504 #laundromat

About Beau: Beau Eckstein is a real estate entrepreneur, TV personality, and commercial mortgage advisor, specializing in construction financing and multi-family lending.

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