Hello,
I've found a well-established and profitable small business to purchase (through an investor). I have the owners personal income statement and waiting for the P&L and other docs. Please excuse my ignorance as this is my first small business I'm looking to operate/own. I'm going to be using an investor and will have to obviously repay the note. The investor wants 10%, which I think is fair for the amount (around $400k) he is lending. What is a normal length of terms; amortized over 5, 10, 20 years with a balloon payment at the end of 3-5 years? That's around $3860 a month/$46,320 a year (with 20 year amortization) to pay back the loan by my guesstamation. My ignorant question is: will that loan re-payment come out of the business income as an expense before I get paid or reap any of the profits (which if it does then i expect it to decrease my net income!?) OR do i pay that back from (my net income) based off the amount the owner gave me as their net income(which i would hope/speculate be near what my net would be also)? I'm trying to figure out if the business can/will support itself, my daily living expenses AND the loan payments. the scenario I'm looking at with the info i have right now is: owner annual net income:$81k, loan repayment: $46k which only leaves me $35k to live on a year...The concern i have with this is that i barely make it raising two kids on that $35k a year now as it is, and the fact that it will take 20 years to pay the loan off at that amount, and I don't know any investor who wants to wait around for that(matter of fact, my investor said he'd rather do a short term investment, I'm guessing 3-5 years). Another observation and question is: how does one pay the balloon at the end of the 3-5 years if the business can't support that lump sum when its barley able to satisfy the 20yr amortized amount?
So I'm by far not an accountant but it seems like my math and logic are in place, but I'm hoping I'm wrong because if I'm right, then I'm sad to say i don't think this business venture will work out for me...which leads me to the frustrating and defeated question of: if i don't have the $400k cash myself, then how do i start my own business like this!?
I appreciate ANY and ALL guidance and answers you can provide! Thanks in advance.
Signed,
Frustrated
I've found a well-established and profitable small business to purchase (through an investor). I have the owners personal income statement and waiting for the P&L and other docs. Please excuse my ignorance as this is my first small business I'm looking to operate/own. I'm going to be using an investor and will have to obviously repay the note. The investor wants 10%, which I think is fair for the amount (around $400k) he is lending. What is a normal length of terms; amortized over 5, 10, 20 years with a balloon payment at the end of 3-5 years? That's around $3860 a month/$46,320 a year (with 20 year amortization) to pay back the loan by my guesstamation. My ignorant question is: will that loan re-payment come out of the business income as an expense before I get paid or reap any of the profits (which if it does then i expect it to decrease my net income!?) OR do i pay that back from (my net income) based off the amount the owner gave me as their net income(which i would hope/speculate be near what my net would be also)? I'm trying to figure out if the business can/will support itself, my daily living expenses AND the loan payments. the scenario I'm looking at with the info i have right now is: owner annual net income:$81k, loan repayment: $46k which only leaves me $35k to live on a year...The concern i have with this is that i barely make it raising two kids on that $35k a year now as it is, and the fact that it will take 20 years to pay the loan off at that amount, and I don't know any investor who wants to wait around for that(matter of fact, my investor said he'd rather do a short term investment, I'm guessing 3-5 years). Another observation and question is: how does one pay the balloon at the end of the 3-5 years if the business can't support that lump sum when its barley able to satisfy the 20yr amortized amount?
So I'm by far not an accountant but it seems like my math and logic are in place, but I'm hoping I'm wrong because if I'm right, then I'm sad to say i don't think this business venture will work out for me...which leads me to the frustrating and defeated question of: if i don't have the $400k cash myself, then how do i start my own business like this!?
I appreciate ANY and ALL guidance and answers you can provide! Thanks in advance.
Signed,
Frustrated
Aucun commentaire:
Enregistrer un commentaire