There is no perfect answer. Much depends on your skill set, experience and what you like, but at the top on my list in an increasing Inflation would be a Small to Medium Sized Manufacturing or Distribution Company. This may be out of your price range to buy, but if you have good credit, some savings for a down payment and the ‘right stuff’- the SBA will lend you 80%, 90%, even in some cases 95%. Time to Buy a Small or Large Raleigh NC Business, contact Probiz Business Consulting for the right advise for your new business acquisition.
And here is the Inflation Bonus!
If you have read this far, you are ready for it. You lock in today’s low interest rates and repay the loan with inflated dollars over 10, 15, maybe even 30 years. Let’s use land as an example for simplicity purposes.
I’m looking for 500 acres to grow Hemp. (see my article on Hemp). I think it is a ‘future product’ that will replace oil in plastics, save our forests and so much more. Next, I find some prime farm land for $6,000 per acre. That is $3 million and I need another $500,000 for tractor, tools and seeds so I apply for a $3,500,000 SBA Loan. I only have $175,000 liquid but I have good credit and a sterling business plan which includes a Certified Business Appraisal. I get the owner to carry a Note for $175,000 and that equals $350,000 or Ten Percent Down as far as the SBA is concerned. In actuality, I’m leveraged and only spending 5% and borrowing 95%. To keep the math simple, let’s call it a 10 year SBA Loan. (could be as much as 25 years on real estate). So the SBA annually wants about $350,000 with interest for ten years. My business plan is for a million a year in hemp sales and since I am doing it all myself as the sole owner, my costs are only $100,000 a year and, of course, the $350.000 SBA loan payment. I ‘net’ $550,000 for my labor, risk and foresight. (I also pay off the Seller Note the first year, so only $375,000 at the end of Year One in my pocket).
Over the next Ten years, Price Inflation allows me to keep selling my Hemp for ‘X’ PLUS over and above the Million Dollars. So maybe $1.2, 1.5, 1.8M etc. But Monetary Inflation makes my $350,000 annual FIXED loan, the equivalent of $325,000, $300,000, $250,000, etc.
These are just random numbers for illustration, of course. But the same applies for a Small to Medium Sized Manufacturing or Distribution Company, or any other category that allows you to do a similar business plan.
Risk Alert! Inflation can and will destroy many otherwise profitable ventures. Buying a business, and operating successfully and profitably has always been and will always be challenging.
If you are reading this, you know what I am about to say next: Get Help.
Do not go it alone. This is a huge decision and the due diligence, funding, analysis, and projections are daunting. Engage a Buyer’s Representative, a Business Consultant. Get help with the business plan and the loan doc prep. Be sure to obtain a Certified Business Appraisal as part of the process. Here at Pro Biz, that’s what we do.