Am I missing something? (loan-related)

Hey everyone!

I have to admit this post is more of a frustrated rant than a true question, but I may be missing something blatantly obvious, so hopefully one of you can smack me upside the head with good news! :smiley:

I’m nearly 1/3 done paying off my contract for deed loan from the previous owner. Like most of those contract for deeds - my payments were pretty unrealistic. Thats understandable because not many people predicted the economic woes that would hurt our industry a few years ago. Unfortunately, the previous store owners’ new venture went under, so his payment from me is his only source of income at the moment. So he cant make things easier on me payment-wise in the near future.

About twice a year, I talk to a banker and search the web to see about getting a traditional loan that I could stretch out over a 7-10 year period. I havent even had a bank give me enough time to actually look at my books and see that I am still turning a decent profit every month. The reason they refuse to talk to me is always the same - no real estate for the business. From what I can tell, I could have a net profit of 50k/month, and would still have no luck!

My home value has dropped so significantly since I purchased it, that an equity loan would only cover about 10% of what I need for the contract payoff. I really dont have any idea how anyone can get a traditional loan for anything in a rented building. Post-store payment, I dont bring home enough money to put any away for a loan down payment or to build up equity, so I’m virtually stuck for the next 4 years I think.

Things could be worse, the sales are still decent, but Im sick of working 70 hrs/week and paying myself 4 bucks an hour(luckily my wife makes decent money)! The gross profit for the store (after all expenses except loan) ranges from 5500-7000 per month, but my store payment is 6000/month.

I know, it sounds like I need a hug, but maybe there is a chance I’m missing something blatant! Heck, I’m almost ready to give the Jesus Pizza thing a try… :roll:

Thanks for letting me rant!
The Calzone Kid

Banks won’t loan without collateral these days. I have excellent credit and a booming business thats been around since 1959 and when I take a loan out I still need to put up 25%.They are worried that everything will fail.

Keep digging! You will get out from under that payment. You are a third of the way there already.

  1. Research SBA loans. There are loans from the SBa that do not require real estate.
  2. Tell the seller that you need to cut the payment to 4K and ask to document the agreement to the new amount.

Maybe I missed something, but I really don’t know what a “contract for deed” is. Does that mean that you have a seller takeback deal that will convey the deed to the building to you upon full payment of the seller takeback note, or does it mean that you will get only the business, equipment and goodwill when you payoff the seller takebak loan? If the seller financed only the business , equipment and goodwill, then the terms of your lease will be important in seeking a “takeout” loan ( a loan to refinance the loan from the seller), since you have proven your ability to operate the business at a respectible profit and only need the full right to carry on with that track record by utilizing the same location as you move forward.

If the “deed” reference is indeed for the building, then the bank, or bank orriginated SBA guaranteed loan, can be secured by the building itself, since the seller would be paid in full by the refinanced loan. And since you have been paying for sometime (couldn’t discerne how long) there must be some equity in the building that would be attractive to the new lender???

Of course, if a “contract for deed” refers to only the business assets, without the building, then your quest to find a takeout loan becomes more problematic. In any case, there is at least hope in contacting a bank that offers SBA financing. In fact, some banks have something called a Community Reinvestment Act committment that would offer you encouragement in seeking refinancing there. In any case, it sounds like you are running a profitable operation that will afford you greatly increased income when the seller takeback is paid off----just make sure that you are very kind to your wife, since she rarely sees you and is probably tired of a steady diet of pizza. All joking aside, I wish you the very best.

Yikes, $6000 a month? Did u go in with no money down?
4 more years equals around $300,000.

Personally, i would go back to the seller and renegotiate the terms, so both parties can continue.

& i hope the building is yours after paying this off.