A while back I was very interested in purchasing a business. All of the numbers seem like it is profitable enough to support my family. It is a small inn, and having hotel experience I thought that work well. It is in a beautiful place. It seems to attract good people. Looking at the reviews and the website I could see a few things that I would improve, but overall guests seemed to love it, and it works well, so there would be very little to change.
I e-mailed the owners an offer directly, knowing that we might have issues if we tried going through a bank since we do not have a down payment. The response was bit rude, but I respect that they do not want to carry the contract. That’s fine. What bothered me was the off-handed reference they made to money as a proof of commitment. I know that people expect a down payment, and that banks will not proceed without one. My father had said something about ‘putting some skin in the game’. He was also referring to money, but I thought that there were other ways of showing commitment.
I brushed off the comment and proceeded to try to find some way to finance this purchase using the business itself as collateral. Everyone is more than willing to do that part, after all that is what a mortgage is. But without a down payment or additional collateral, I could find no way of doing it. We spoke to banks, bought nicer clothes, searched online, and pursued every avenue we could think of, even crowd-funding. In the end, the fact that we do not have enough money in savings means that we cannot buy this business, even though it would more than pay for itself and support us better than we are living now.
To me this seems like nothing more than a way to ‘keep people in their place’. I would think that if my family threw ourselves into the business, worked there for free for a few months to observe and learn, as we survive off of what little savings we have, would show commitment. If we quit our jobs to focus solely on the business, that would show commitment. Our intention to let our children run it when we retire would show commitment. All of these things we are willing to do. But to the world, if Donald Trump saw the place was for sale and wrote a check for the total that would show more commitment. Even if he never saw the business and never even thought about it again.
There needs to be a way for people to break through this barrier that we have found. Today we could work our entire lives, saving every penny for this purchase and not save enough. Even if we never took a vacation, did not send our children to college, and worked until we were too old to run the place ourselves. Eventually we were forced to give it up.
And this business is relatively inexpensive for this type of thing. I use the example of Donald Trump because his ‘small 1 million dollar loan’ would nearly buy it in full.