You’ve wanted to run a liquor store and finally have a chance now that the local store is up for sale. But before you put in your offer, consider if you need an SBA small business loan.
SBA loans can help you afford this major purchase so that you can start your business the right way. And you won’t need to result to credit card debt or borrowing thousands from friends and family.
Read on to learn about small business loans for buying a liquor store.
Get a Liquor License First
The first step to getting an SBA small business loan is to obtain a liquor license. Some SBA lenders won’t let you use loan money to purchase a license.
If the state denies your liquor license application, you won’t be able to acquire a business. Then, you won’t be able to pay the loan back, which is risky even for the top SBA lenders.
Fortunately, you may not need to borrow from SBA lenders in some states to afford a liquor license. While California charges $13,800, states like Idaho only charge $100 each year.
You can use a credit card or borrow money from someone to help cover the cost. In states like Pennsylvania, you may need to buy the liquor license with the acquisition since the state limits the number of permits.
How You Can Use an SBA Small Business Loan
Before searching for “SBA lenders near me,” consider how you can use the money. The specific ways depend on the type of SBA loan you obtain, but there are a few options overall.
Figure out how you want to use funding from SBA loans for your liquor store acquisition to help decide on the best loans for you.
Purchase a Store
Of course, you can use the money to buy an existing liquor store. As with any SBA loan, you’ll need to prove your eligibility and provide SBA lenders with any necessary documents.
Unfortunately, acquisition loans can be harder to obtain because they can take longer to process and have more risk. However, you can work with some of the best SBA banks to get the funding you need.
Once you qualify for an SBA small business loan, you can enjoy its benefits. Many acquisition loans won’t require collateral or loan covenants, and you can pay the money back over a longer period.
To get this loan, you will need to prove the business valuation with a third party, and you have to pay a guarantee fee at closing and ongoing while you have the loan.
Expand the Store
Perhaps you want to acquire a liquor store and make it bigger. If you have enough loan money, you can use the remaining funds to expand the store.
You can also get another SBA loan and use that capital to pay to build more space for your store. Or you might use the money to buy a second location to expand your business.
Expansion can happen soon after you first acquire the store, or you may decide to wait. Either way, SBA loans are a good option for growing your new business.
Fund Inventory
If you have money left over or get another loan, you can use it to fund the purchase of inventory for your new liquor store. Buying merchandise can get expensive quickly, and you need to keep up with the sales cycle.
Before you start making a huge profit, an SBA preferred lender can help you get the money you need. Then, you will be able to stay in business and start making money.
While you don’t want to take out more small business loans than necessary, the funding can help get you off the ground. You may receive some inventory when you buy the store, but it might not last long enough for your to turn a profit.
Review the Financial Records
When you get close to closing on an acquisition, you should look at the financial records of the business you want to buy. Look at the numbers that the seller has recorded regarding profits and losses.
Some owners might not have the best bookkeeping, and they might keep cash transactions a secret to evade taxes. That means a seller could try to convince you they’ve made more than they have and so the business is worth more.
However, keep your focus on the official books when it comes to numbers. Then, you and a third party can get a valuation based on that number to determine the amount of the sale.
Compare 7(a) and 504 Loans
Two of the most common types of SBA loans are 7(a) and 504 loans. A 7(a) loan is useful for acquiring a business, and you can use it to expand the store or cover working capital.
After you acquire the business, you can look into 504 loans to buy an existing building for a second store location. Or you might use the money to build a new store.
While 7(a) loans are the best option for now, you should consider 504 loans after the acquisition. Then, you can build the business you want and get the funding you need.
Research Lenders
Another vital part of acquiring a liquor store is to research SBA lenders in your area. Of course, you can do this by spending hours looking at individual lenders and banks.
However, it can help to use a service that finds lenders and compares them for you. You answer some questions about your business loan needs, and you can learn about the best SBA banks for your business.
That can speed up the process, which may make or break your ability to buy a liquor store that’s on sale. Some sellers may not want to wait around for you to find the perfect lender.
How Will You Obtain an SBA Small Business Loan?
From the solo entrepreneur to the team of business owners, an SBA small business loan is a useful tool. If you want to acquire a liquor store, SBA loans can help you get started with your new venture.
Just make sure you can use the loan for the acquisition and that you don’t overpay for the liquor store. That way, you can start your business on the right foot.
Do you need help finding SBA loans? Fill out our questionnaire to get started.