Buyers who finance an existing Freeport, IL business, whether a repair garage, an insurance agency, a restaurant or a tavern, can combine three sources: their own cash as a down payment, a note carried by the seller, and a term loan from a funding partner for the rest. This article covers buying the business itself, its equipment, customer list, name and staff. The building is a separate purchase that this site does not arrange.
A purchase is rarely paid with one check. Buyer cash, a seller note and a term loan each cover part of the price. The seller's records carry the request, and a working capital cushion protects the first year.
What the seller numbers need to show
A funding partner looks at the business being bought much as it would look at the buyer's own: it wants to see whether the profit can carry the new debt. The difference is that the records come from the seller, so the request depends on how complete the seller's files are and how willing the seller is to share them before closing.
For a garage, that means three years of returns that match the bank deposits, a list of the lifts, scan tools and other equipment with their ages, and how much of the work comes from a few fleet accounts. For an agency, it means commission statements by carrier and how many policies renewed in each recent year. For a restaurant or tavern, it means the card processor statements next to the sales on the tax return, and a lease with enough years left to cover the loan.
Any gap between what the seller says the business earns and what the returns show is worth settling with the seller's accountant before the request goes in, so the review does not stall on it later.
The local field gives some sense of scale, garages first: in the 2023 County Business Patterns, 23 of the 36 establishments under Automotive Repair and Maintenance (NAICS 8111) in Stephenson County, IL had fewer than five employees. The same year counted 29 establishments under Insurance Agencies (NAICS 524210), and 24 of those agencies (82.8%) had fewer than five people. In businesses that small, the owner can be a large part of what is being sold. The share is smaller for dining rooms: 9 of the 31 establishments under Full-Service Restaurants (NAICS 722511) had fewer than five employees that year.
Down payment, seller note and loan
Illustration only, invented figures: a buyer agrees a $340,000 price for an established repair garage, equipment and customer list included. The buyer puts in $34,000 (10.0%), the seller carries a $51,000 note (15.0%) over 48 months at 6%, and a $255,000 term loan covers the rest over 120 months at an annual rate of 10.5%.
| Piece | Amount | Monthly installment |
|---|---|---|
| Buyer cash | $34,000 | none |
| Seller note, 48 months, rate per year 6% | $51,000 | $1,197.74 |
| Term loan, 120 months, rate per year 10.5% | $255,000 | $3,440.84 |
Together, the loan and the seller note take $4,638.58 out of the garage each month until the note ends after year four, in this example. If the garage's records show an invented $6,900 a month left after paying its costs and a wage for the new owner, the debt leaves $2,261.42 a month of room. A partner can weigh whether that margin is enough.
A seller note shows that the seller still has money riding on the business after the sale, and it shrinks the part the term loan has to carry. The note, its rate and when its payments start are terms the buyer and seller agree, and a funding partner may ask to see them.
Keeping staff and customers through the handover
A large part of what a buyer pays for is people and habits: the technicians who know the regular customers' cars, the account manager the agency's policyholders call, the cook who runs the line on a Friday. A purchase agreement can keep the seller on for a set training period, introduce the buyer to key accounts in person, and keep the business name, phone number and website unchanged.
Staff can hear about a sale before anyone tells them. A plan for how and when to tell them, and what stays the same for them, belongs in the first week. An agency buyer can confirm with each carrier how its contract moves to a new owner, and a garage buyer can check that supplier accounts and parts pricing carry over.
A funding partner may ask how the handover is planned, because customers who leave with the seller take the cash flow that pays the loan with them.
A first-year working capital cushion
The first months after closing bring costs the purchase price does not cover: deposits for utilities and insurance in the new owner's name, inventory and parts to top up the shelves, software and phone accounts moved over, and repairs the inspection missed. Wages also go out before customer payments catch up, because invoices the seller sent were collected by the seller.
Illustration only, invented figures: the garage pays $6,800 in wages every two weeks, and the first 30 days of customer payments in the buyer's name come in slowly. A 30-day stretch holds 2 or 3 paydays, so the cushion for wages alone is $13,600 to $20,400 in this example, before parts and deposits.
A working capital loan or a credit line set up at closing covers that stretch without touching the money set aside for the loan installments. Requesting it at the same time as the purchase funding lets a partner look at the whole plan at once. The funding types overview compares the options, and the other articles take up single trades.
By Hazelwater Capital Group · Updated
