I have a friend who wants to buy the business she works for. Her credit is terrible, but she wants to buy the business. It's cost is $350k. I'm helping her research viable means for her to either receive a grant or loan in helping with the purchase. She would be owner/operator as she is already the operator. Being both a minority and a women, I'm sure there are more viable options for her to obtain the assistance. Where can I point her for assistance besides the SBA, etc.

Well regardless of her minority status she is going to find it very difficult to find anyone willing to risk the money because of her horrible personal credit. I would first suggest a credit repair service to help her begin an expedited clean up of her credit score. This will only help her if she can learn to manage her own personal finances.

It is a fallacy that many believe that their personal and professional abilities are and should be viewed as two separate criteria independent from each other. It is simply not the case.

The banks will approve someone if there is a solid cosigner, some money put down towards a purchase, a solid business plan, proven and documented track record of her managing the place successfully, and the seller willing to provide some owner financing as well. Proven cash flow in the practice and at least three years corporate returns, and profit and loss statements for those three years, and a year to date P&L. Personally they will want her last three years individual tax returns as well as any supporting documentation that will shore up her ability to successfully act as both owner and operator of the business. Credentials, degrees etc...Short of this and, regardless of her minority status I am predicting disappointment for her unfortunately.

The credit market has become much more stringent and so bankers are less willing to accept risk in deals than ever before. What type of business is this that she is trying to acquire?

Minority and being a woman shouldn't matter as much as her having terrible credit. Credit Scores are nothing more than how a person manages debt. If she has managed debt poorly, no way is someone giving her a $350K loan to "manage" for them, too risky and probably too little ROI for the investor.

I STRONGLY DISAGREE with OKC@heart about "credit repair services," as they are nothing more than a scam on the poor and she can easily do the same things they do. There is no such thing as a speedy "credit repair", it takes hard work and discipline to get your credit score back up. Until she can manage her personal finances successfully for a couple years, banks probably aren't going to be willing to lend. People get rich slowly, there aren't quick solutions. Credit problems are behavior problems and the behaviors need to be changed over time.

I highly recommend her getting on a budget, my personal recommendation is Financial Peace University (Dave Ramsey Homepage - daveramsey.com (http://www.daveramsey.com) and right now he's offering a free class to test it out) and Total Money Makeover by Dave Ramsey. There are some others out there that are okay, but not as good IMO. You Need A Budget .com is also a decent free tool as well.

The Truth About Getting Debt Help - Debt - daveramsey.com (http://www.daveramsey.com/article/the-truth-about-getting-debt-help/)

If she still insists on purchasing the business and not getting discipline and a budget with her personal finances, I don't recommend it but her only option would probably be to see if the existing owner will self finance. I'd also research to see if the $350K is even a fair price.

[QUOTE=metro;308307]

I STRONGLY DISAGREE with OKC@heart about "credit repair services," as they are nothing more than a scam on the poor and she can easily do the same things they do. There is no such thing as a speedy "credit repair", it takes hard work and discipline to get your credit score back up. Until she can manage her personal finances successfully for a couple years, banks probably aren't going to be willing to lend. People get rich slowly, there aren't quick solutions. QUOTE]

Certainly some "credit repair services" are scams and less than helpful, but some are able to do things, that where as an individual might be able to do for themselves, likely would not know that they could do, nor often have the time and abilities to do. I have watched clients see dramatic results from someone who knows what to look for identify items that can and should be removed from the credit report, thus improving the scores quite dramatically.

I always assume that anyone looking into any service industry does some careful research into the companies prior to hiring services. Likely if she has not been able to manage her finaces effectively, then she is likley not going to have any success in knowing what in her credit report can and ought to be cleared...

Disagree, "credit repair" services simply do what a person can do for themselves. If one doesn't have the aptitude or time to do this for themselves, then they sure don't need a $350K business loan. Ironically you recommend to spend time looking into researching credit repair companires prior to "hiring" them. Doesn't make since to spend money out of pocket for someone who has bad credit and wants more credit, it's counterintuitive.

Ironically you recommend to spend time looking into researching credit repair companires prior to "hiring" them. Doesn't make since to spend money out of pocket for someone who has bad credit and wants more credit, it's counterintuitive.

You are suggesting that bad credit always means that the person has no money. That is not always the case. It can be a sign of fiscal irresponsibility, divorce, medical issues, ie a medical bankruptcy or traditional bankruptcy.

I have worked with high wage earner professionals who have for whatever reason allowed their credit to tank. They then wanted to buy a practice that they have demonstrated for years that they can operate profitably, but the credit score is the lynch pin on the deal.

So they work with one of the credit repair folks and apply careful financial principles and within 6 months to a year are able to be approved based on much improved scores.

By the way the Ramsey Financial Peace University course is great and I would recommend it to anyone! Good call there!

Kudos to the lady for wanting to have her own business. Sounds like the first order of business, regardless of how she goes about it, is to get that credit score squared away. Good luck to her.

Well, obviously I can't tell you the name of the business. But she has successfully operated to being the 7th highest ranked store in the country and has seen a growth of 15%-18% in sales for the past three years consecutively.

I'm going to request that she get her credit report for me from the credit bureaus and pay to get her credit score. Then I can work with her on getting a higher fico.

You didn't mention what the gross and net sales amounted to in this business but I can tell you that I've seen many more business startups fold in the first two years when the owners financed a big part of the purchase.
My recommendation for anyone seeking to be their own boss is to go into whatever line of business you can afford to get into without a mortgage and as success comes, grow that into a bigger buisiness also without borrowing money. If you're looking for an example, see Cole Computers aka Computer Masters. Thier success story began inside a fleamarket.

I hate to be harsh...but if she has difficulties managing her own personal finances, then how is she ready to manage a business and the corresponding financial matters? The odds in the realm of small business are stacked against her far more so than in personal finance (although it sounds like the business has been doing ok).

it's all medical bills that were suppose to be covered by insurance but where not. her health insurance didn't cover a few experimental meds she was taking.

it's all medical bills that were suppose to be covered by insurance but where not. her health insurance didn't cover a few experimental meds she was taking.

I hope she is healthy, now. Starting up a business takes a lot of energy.

nothing too bad, not to put her business out there but she had ovarian cyst and was trying to not have surgery.

nothing too bad, not to put her business out there but she had ovarian cyst and was trying to not have surgery.

Oh, well, that is not particularly shocking - pretty common - so you haven't put too much out there. Hope she is better.

There are all kinds of things out there that can help her. I would start with grants. She already has a successful business and if the growth rate is really that much then companies will line up to loan her the money. From what I know grant money comes from other businesses and the reason they give the money is because it counts as part of they taxes they pay...so if they (granting companies) owe 500K in taxes and give out 250K then that is considered a write off and the other half is let go as well...as long as the grantee uses every single bit of that grant for the business and the business only. That's why it can be very difficult to obtain a grant. If you don't have a bullet proof business plan along with the ability to woo the granters they will not give out a grant because they will be penalized if the grantee doesn't follow through. I only know this because my father is looking to give out a 250K grant to not only help boost the economy with American business but also as a good little write off for him and his business.

Now I'm not quite sure how much this helps with someone looking to buy an existing business, but I'm pretty sure that there is something out there. Also her being female and black does give her some more room to get her foot in the door. Now I might be fuzzy on the details...maybe even way off...but my dad is a pretty good business man and I'll take his word for what he says. So if I were her I'd definately look into getting a Grant.