Buying a limousine business is a little different than, say, buying a house. As always, traditional financing is an option for buyers with qualifying credit. But available financing for limousine companies is not limited to big banks. The small business administration helps connect borrowers eyeing an expansion with SBA-approved lenders, usually under the condition that a small part of the sales price is financed by the seller. This non-traditional type of financing can make a big difference when it comes to affording an acquisition.
Many business owners who would not qualify for a traditional bank loan, especially when credit is tight, find they can obtain SBA funding. The Small Business Jobs and Credit Act of 2010 raised the limit on popular 7(a) loans from 75 to 90 percent, according to the National Limousine Association. Available to existing businesses as well as start-ups, 7(a) loans guarantee up to $1.5 million in financing with terms of 5-7 years depending on a business owner’s financial situation. Caps were also increased for 504 loans, which offer low down payments for long terms, usually 10-20 years, at a fixed rate. Companies making acquisitions or business renovations may be eligible for up to $4 million in 504 funding depending on business type.
The Small Business Association often requires a small amount of seller financing in order to secure funding. The SBA is able to offer its loans by providing backing, which puts lenders at ease about taking on risk. Requesting that a portion of the amount come from the seller helps the SBA stabilize its investments. Acting as a bank, the seller will allow a buyer to pay back the financed portion over time. For firms wondering how to sell a limousine business, offering financing is a proven way to increase buyer confidence. Making a small loan indicates that a seller has faith in the stability of his or her company.
Benefits of Buying an Existing Business
Obviously, capital will be required for any business decision, whether an entrepreneur is looking to start a new company or purchase an existing one. But obtaining financing for a limousine business that is already established is typically a smoother process than borrowing cash for a start-up, which can lead to cost savings in the long haul. With a fleet and customer base already in place, current profits can be immediately leveraged to help cover loan payments regardless of financing method.