Business to finance the purchase of a building. Am I crazy?

[Matt Hubbard]

A bit of history: My wife and I purchased a failing furniture store from a retiring couple 3 years ago. 

• Year 1: lost $80k took no salary
• Year 2: lost $30k took $5k salary
• Year 3: Break even took $80k salary... and that's through a pandemic & being locked down for 8 weeks. 

We have been investing heavily in growth and it has been paying off: We are currently running at 100% year over year revenues. 

There is a building we would like to purchase for right around $2 million including construction costs. It comes with 1 under market tenant, but the other 60% would be our store. We are currently paying $10k in rent(and CAM) and we think the monthly payment would come out to $11k net. 

We are looking at SBA financing, but the banker it telling us we need years of profitability. Something doesn't seem right. So I am reaching out to the financially knowledgeable in Bigger Pockets! How can we get this deal done? Could we BRRR it? Are there other financing sources we aren't looking at? Or can you explain to us what the problems are? Because if we can't purchase a building, I'm not sure how anyone could.

Other data points: 

• The business bank account has $300k in it. 
• We are generating $5-10k free cash flow a month, starting in October
• We have a SBA 7a loan we used the to purchase the business, and there is enough cash to pay it off.
• As owners we have $1 million portfolio of stocks, and paid off house. 
• The building would require a sizable construction loan: $300k, but it's a super upgrade from our current location. 

Please bring me all your best bad ideas!  

Thanks in advance. 

[Greg Dickerson]

Originally posted by @Matt Hubbard:

A bit of history: My wife and I purchased a failing furniture store from a retiring couple 3 years ago. 

• Year 1: lost $80k took no salary
• Year 2: lost $30k took $5k salary
• Year 3: Break even took $80k salary... and that's through a pandemic & being locked down for 8 weeks. 

We have been investing heavily in growth and it has been paying off: We are currently running at 100% year over year revenues. 

There is a building we would like to purchase for right around $2 million including construction costs. It comes with 1 under market tenant, but the other 60% would be our store. We are currently paying $10k in rent(and CAM) and we think the monthly payment would come out to $11k net. 

We are looking at SBA financing, but the banker it telling us we need years of profitability. Something doesn't seem right. So I am reaching out to the financially knowledgeable in Bigger Pockets! How can we get this deal done? Could we BRRR it? Are there other financing sources we aren't looking at? Or can you explain to us what the problems are? Because if we can't purchase a building, I'm not sure how anyone could.

Other data points: 

• The business bank account has $300k in it. 
• We are generating $5-10k free cash flow a month, starting in October
• We have a SBA 7a loan we used the to purchase the business, and there is enough cash to pay it off.
• As owners we have $1 million portfolio of stocks, and paid off house. 
• The building would require a sizable construction loan: $300k, but it's a super upgrade from our current location. 

Please bring me all your best bad ideas!  

Thanks in advance. 

Sounds like you need to talk to some more banks and credit unions. They are all different, have different appetites and offer different rates and terms. SBA requires a lot of paperwork and time and some lenders, even approved lenders don't lie to mess with them. Make sure you put together a complete detailed financial package for the lender including the executive summary of the property and business plan, your last 3 years tax returns for you and the business, current P&L and Blance sheet for the business and updated PSF.