What type of loan do I need?
This might be a stupid question but no matter how hard I look, I cannot seem to find an answer that makes me feel comfortable that I am taking the right steps. Any help or opinions are greatly appreciated.
This is my situation.
There is a bowling alley for sale in my town. Its been in business since 1986, was sold by the original owners (in their late 80’s) to a entertainment company 3 years ago, the entertainment company is not from this area and did not want to be really involved in developing the business, they wanted to just collect a paycheck, they rarely even show their faces there. Now they are looking to sell it, they were not looking for a company to put work into. So they listed it at $285,000, this also includes a 3 bedroom ranch style house that is on the property. All the equipment, building, house, liquor license, etc. is included in the price.
My husband and I are very interested in purchasing the property, both of our credit scores are in the mid 700’s, and we both have full time jobs. Unfortunately we only have about $18,000 cash on hand, and we do not own current home so no collateral either. I am worried that we will not be able to get a loan because we don’t have enough for %20-%30 down payment. We do not want to pass up this opportunity, but I would like an opinion from a professional. What sort of loan should I be looking for since I am buying the real estate as well as the existing business? Will I have any chance of qualifying for a loan without personal collateral? I’m going crazy, Help!!
Great questions. So it’ll definitely be hard to qualify for a loan with $18k cash-on-hand. This is because you’ll typically not only need to cover 20% of the purchase price as payment but lenders will also want to see that you have enough cash to cover your mortgage / business’s operating expenses. Sometimes they’ll like to see as much as 6 – 12 months cash on hand.
However, all is not lost. There are loans out there that require less than 20% down and have fewer requirements for approval. Further, these loans can finance either a business or a real estate property, or both.
You could also look into hard money loans and private money loans. Both of these are short-term loans, but they’re easier to qualify for and gives you time to meet the more stringent qualifications of a permanent loan.
Hope this helps!