Podcast: Download (Duration: 3:27 — 3.3MB)
Are you considering purchasing a bowling alley business with real estate, arcade, and snack bar in Colorado? Do you have cool ideas to update the property and add pool tables to bring in more revenue? If yes, then you might need financing to make your dream a reality. In this blog post, we'll discuss how you can finance a bowling alley and arcade with an SBA loan.
What is an SBA Loan?
SBA stands for Small Business Administration, a government agency that helps small businesses by providing loans, counseling, and other resources. SBA loans are backed by the agency and are offered by banks, credit unions, and other lenders. These loans are designed to help small businesses that might not qualify for traditional financing.
SBA 7(a) Loan for Bowling Alley and Arcade Business
According to the video transcript, an SBA 7(a) loan would be the best option to finance the purchase of a bowling alley business. With an SBA 7(a) loan, you can finance the purchase price, working capital, employee compensation, renovations, pool tables, and other furniture, fixtures, and equipment (FF&E) costs.
Equity Injection and Working Capital
The total project cost includes all these expenses and is financed up to 85% of the project cost. The borrower must provide the remaining 15% as an equity injection. This means that in the case of Terry, who wants to purchase the bowling alley business for $850,000 and needs $275,000 for updates and pool tables, he must provide $127,500 (15% of $850,000+$275,000) as an equity injection.
Moreover, the borrower can also build in working capital to cover the business's first few months' expenses, so they don't have to use their pocket money.
Borrower Qualification
To qualify for an SBA loan, the borrower must have a good credit score, a strong financial standing, and relevant experience in the industry. The lender will look at the borrower's business plan, resume, credit score, net worth, and other factors before approving the loan.
SBA 7(a) Loan Terms
SBA 7(a) loans have a maximum loan amount of $5 million and a repayment term of up to 25 years. The interest rate is usually lower than traditional financing rates and is based on the prime rate plus a margin.
Conclusion
If you're planning to purchase a bowling alley and arcade business, an SBA 7(a) loan could be a great financing option. You can finance the purchase price, renovations, FF&E, and working capital while limiting your equity injection. However, it's essential to consult with a lender to understand the loan terms and borrower requirements before applying.