There is a business for sale in my area for close to $1 million. This includes the building and business. There is a strong track record of profits in the past years and the company has been around for a long time.
I was wondering if someone knew how much money most banks need for a down payment for something like this.
Any help from someone who has some experience on this subject would be greatly appreciated.[/quote]
It depends. Most likely, the bank will view it as a real estate loan secured by the property and repaid by the cash flow of the business (this is also the structure that would probably make the bank the most comfortable, because they will have the real estate).
You will need to show at least three years of positive cash flow, and be able to demonstrate enough cash flow going forward to cover the debt service (principal and interest) by at least 120%.
In a commercial real estate deal, most banks will lend against 80% (ballpark; it varies) of value/cost i.e. you will contribute $200,000. The bank may also ask for a personal guarantee from you, so the stronger your personal financial situation, the better.
Also, any case you can make about your track record as a business owner will be helpful.
I do this for a living, so if you have any questions please feel free to PM me.