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I'm sure everybody has or had this situation before. Basically, all my income (which is around $7K / month) is being washed off somewhere: rent payment + car payments + different insurances and so on. Unable to defer some money even for buying own house or apartment (which required 25% of down payment) with normal housing prices in my area between $200K - $400K. Recently decided to launch a small business: purchasing tiny corner grocery store near me and putting my friend as manager. The owner is asking for $90K for the whole business, plus additional $15K for reissuance of paperwork. Going to the bank and negotiating with them on a loan with the amount of $105K with a low interest rate seems like meaningless for me, as I doubt I can get a good deal. What will be the most appropriate way to get this started? Is there any non profit communities/groups that support small business launchers? Or there may be some government programs that do the same? Would like to get an advise from the experienced person, who went through this in the past.

  • You might get better answers by tagging your question with your location. Though to be honest I'd be surprised if any such community support groups offer financing. Perhaps an Angel Investor might help, but they are going to expect you to put some skin in the game yourself - just like a bank wants a down payment if they finance your home purchase, lenders aren't going to take on 100% of the financial liability of a small business purchase that they don't get to call the shots on, why would anyone? – CactusCake May 23 '17 at 21:00
  • @CactusCake Location is South Florida, United States – Tired Of Trading May 23 '17 at 21:04
  • I don't know how well this will suit you, but I've heard LendingClub does small business loans of up to 300k. – schizoid04 May 24 '17 at 1:33
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I am going to assume your location is the US.

From what I am seeing it is unlikely you will get a loan other than some government backed thing. You are a poor risk.

At 7k/month, you have above average household income. The fact that all of your income "is being washed off somewhere" is a behavior problem, not a mathematical one. For example, why do you have a car payment? You should purchase a car for cash.

Failing that, given reasonable rent (1100), reasonable car payment (400), insurances (300), other expenses (1000), you should clear at least 4000 per month in cash flow. Where is that money going? Here tracking spending and budgeting is your friend. Figure out the leaks in your budget and fix them.

By cutting back, and perhaps working a second job or somehow earning more you could have a down payment for a home in as little as 10 months. That is not a very long time.

Similarly we can discuss the grocery store. Had you prepared for this moment three years ago you could have bought the store for cash. This would have eliminated a bunch of risk and increase the likelihood of this venture's success. If you had started this one year ago, you could have gone in with a significant down payment. The bank would see this as a good risk if you wanted to borrow the remainder.

Instead the bank sees you as a person as a poor risk. You spend every dime you make without much concern for the future or possible negative events (by implication of your question). If you cannot handle the cash flows of regular employment well, how can you handle the cash flows of a grocery business? It is far more complex, and there is far less room for error.

So how do you get a loan? I would start with learning on how to manage your personal finance well prior to delving into the world of business.

  • B At some point you are right, managing my own income is my own responsibility. But there are other personal things in life that prevents me from collecting money (in the range of 10 months as you mention for the first downpayment). – Tired Of Trading May 24 '17 at 14:34
  • Your comment changes nothing. Can you start saving/investing money today? If not, then you will still be a poor risk in the future. Once you can start then you will be come a better risk. – Pete B. May 24 '17 at 14:40
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    When he says 'car payments' in the original post, part of me thinks this person may have multiple car loans, and thus multiple car payments per month, which would quickly eat away his income. – schizoid04 May 24 '17 at 20:45
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    @GordonFreaman Depending on your area, you may be right about needing a car. But the general consensus here seems to be that it would benefit you greatly to get rid of the financed cars and just buy something outright as soon as you possibly can. Even if it's a car you won't have for very long, something that's used and you can own will work in your favor, especially when you consider you won't be forced to have full-coverage insurance on two used cars you own. – schizoid04 May 26 '17 at 16:09
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    Although, if your commute is somewhat small, it may be possible for you to bike instead. I'd say a number one priority for you to clear house on finances, though, would be to get rid of the financed cars (multiple) and their associated debt any way you can. Assuming you're paying a reasonable $300/month on each car, the savings from both ($600/month) being gone pays for a cheap used car (Lets say $2400) in 4 months. It's a move that pays for itself. New, financed cars are wonderful but you're likely paying more into them than the value you're getting out of them. – schizoid04 May 26 '17 at 16:12

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