What not to say as a new searcher

July 28, 2024

by a lender in Stuart, FL, USA

Here is a tip for all new searchers when speaking to a lender.

TIP # 1- Stop telling the lender that this is your first business (which is ok) but then telling them, this will be the first of many because you intend to have a portfolio of 40 businesses in the next 10 years. All this does is tell the lender that you have absolutely no idea what you are doing, and you are already pipe dreaming about owning all these other businesses. 100% of your focus should be on making sure the business you are buying doesn't crash and burn, understanding the product or service you will be selling. Learning the process and procedures involved in running your new business and making sure you have a resolute understanding of the monetary controls. Focus, focus, focus is how you win.

TIP # 2- Stop telling the lender that failure is not an option. If you do not think failure is an option than you do not understand how you can fail. You are only looking at one side of the coin. Failure is always an option especially when things happen completely out of your control. Anyone remember the BP Oil Spill as an example? Of course, nobody wants to fail, but statistics don't lie and knowing when to stop throwing good money after bad is a sign of maturity.

Lenders want to know that they are making a prudent decision by lending you x amount of millions. They want to know you are committed to the project and that your head isn't in the clouds, that you will be (at least for a while) boots on the ground running the business and learning everything you can about it. They do not want to hear how the seller and existing employees are going to run things while you visit once in a while to tell everyone good job. That is pure foolishness.

Buying a business does not make you an entrepreneur. Working at the attributes of being an entrepreneur makes you one. Buying a business can be very rewarding or it can make you very bankrupt, choose wisely.

Reply by a lender
in Stuart, FL, USA

Just reaching out to any old lender isn't going to do any good. Especially when talking about SBA loans. Every lender is different, the deal type, the loan size, the down payments, the collateral, the structure, everything has to be taken into consideration so that you can determine where the deal should go instead of sending it shotgun to everyone for them to turn you down and tell you, you don't have a deal when in fact you probably do but it went to the wrong lender.

Preparing and structuring the deal with a loan broker prior to going to a lender should be done right up front. After the loan is structured correctly so that it makes complete sense to the lender, only then should it go to them. Most BDO’s (lenders reps) will not tell you how to structure a deal or at the very least tell you how their bank likes to do it which may not help you at all.
That's the problem with a lot of the deals on this board. People structure them all kinds of goofy ways and then try to cram them down the lenders throat only to find out they're not getting any funding. They're going about it backwards.

Reply by a professional
from University of Southern California in North Palm Beach, FL, USA

OMG, someone telling people what actually happens!?! Excellent post, but some people don't like too much reality. That's why so many of us see so much nonsense, including from repeat performers, some of which continually tell us how much they know and want to share it with us.

+7 more replies.

Join the discussion