Question – I have had an opportunity come by me that is a great chance to be my own boss…A liquor store for sale listed at 650000 + inventory which is running around 400-450k estimated. My question is can a SBA loan be used for a liquor store? How much will I need to put down? and Will the SBA loan cover inventory? It has a strong cash flow back to the owner. For me I have a great operations background as well as liquor and restaurant experience, but do not have a clue when it comes to financing a business and how to obtain it.
Our Response – The SBA can be used to help secure funding. The 7(a) program would be a great option as it allows long-term working capital to purchase inventory as well as purchasing real estate, equipment fixtures, etc. which is how I’m assuming the deal to be structured from your question. A 7(a) loan can finance real estate up to 25 years, up to 10 years for equipment and up to 7 years for the inventory. A 7(a) loan can be made up to 5 million dollars and you are well under that amount.
The SBA 7(a) program can guarantee as much as 75% on loans over $150,000, so at a minimum you will need to have at least 25% at closing ($275,000 assuming $650,000 plus $450,000 on the inventory). While $275,000 may be a lot to come up with to purchase the business, there are a few creative ways to come up with it such as having the owner carry some of the financing (he would be the bank on a portion of the loan), home equity, micro loans or investors.