What Size of Business Should You Buy?

[@Bodacious406]

Probably the best video on Buy Then Build, great job!

[@BuyThenBuild]

Thanks so much, Bod! We'll get more Chelsea on here!

[@charlykash2648]

This video provide tons of value! 🔥

[@BuyThenBuild]

+1

[@bennyortega5056]

Wow Chelsea, you really ROCK! You are amazing. Very impressed with your knowledge and how practical you are with the examples you shared. If you are the gatekeeper for the Acquisition Lab then no doubt it is a solid group. Thank you for sharing this video, it really help me!

[@ryanlay3149]

What was the answer to the question about post-close liquidity and whether working capital would be considered by a lender in that post-close liquidity? Thanks so much for this presentation!

[@chelseawood4418]

Hey Ryan - I don't remember the question but if you post it - I'll answer. Working capital can in some situations be considered but it's really not in your best interest. You want to make sure you have enough working capital and when that burns quickly (because it does), you also need personal reserves to go to if absolutely necessary which is why lenders require post-close liquidity.

[@therealkingman6737]

You can never fund your down payment from debt is not true. There are several ways to make that happen. Love your program. I am a big fan.

[@chelseawood3229]

You are right. I should have been clearer. You can absolutely use debt to buy the business as long as there's an income source to make those payments that are outside of the acquisition. If the cash flow is strong enough then it's possible to do even without outside income. However, if you don't have another source of income to cover the debt then that debt gets calculated into the overall expenses of the business and changes the Debt Ratio which can make financing challenging. Hope this helps clarify what I meant!

[@ryankeenan351]

Can you use a heloc as some of the down payment to buy the buisness?

[@richscott2619]

My understanding is that depends on the lender. Also, there are no restrictions when doing seller financing. That being said, there may be SBA restrictions I'm not aware of if you go that route.

[@chelseawood3229]

You can absolutely use a HELOC to buy the business as long as there's an income source to make those payments that are outside of the acquisition. If the cash flow is strong enough then it's possible to do even without outside income. However, if you don't have another source of income to cover the debt then that debt gets calculated into the overall expenses of the business and changes the Debt Ratio which can make financing challenging.

[@ryankeenan351]

@@chelseawood3229 Thanks for the info! What about if you don't really have expierence in buisness. I have a bunch of rentals I self manage would the be enough to get me past the buisness expierence part?

[@chelseawood3229]

@@ryankeenan351 It's really unique to what you're trying to do in whatever entity you're acquiring and whether or not you have transferable skills. The underwriters just have to be comfortable that you hae the business acumen and skills/knowledge/abilities to own and operate the business they're lending you money to buy. It's all about the narrative. Some people will have advisors or plans to hire someone/bring on a partner to fill the gaps in their background.