Buying a retail store can be both personally and financially rewarding. However, there are significant differences when buying a store that’s represented by a broker and one that is “for sale by owner.” 

“For sale by owner” simply means that there isn’t a broker involved in the sale of the business. Some obvious benefits to the buyer include that they have direct access to the seller, don’t need to pay broker/ commission fees, and that they generally have more control over the pace of the sale process. 

However, one major drawback that is often overlooked when buying a store for sale by owner is that getting financing to complete the retail store purchase becomes more time consuming. 

When getting financing for a business acquisition, banks usually ask for many pieces of information including financial statements, business plans, growth opportunities, inventory statements, fixed asset statements, previous tax returns and much more. Normally, in a sale process, the broker representing the store assists in preparing this information in advance to share with the pool of potential buyers. This information is usually bundled into an Offering Memorandum (other names for this document include the “CIM” or confidential investment memorandum, or “CIP” which stands for the confidential information presentation”).

When you’re buying a retail store for sale by owner, it’s on the buyer to organize and prepare all information normally contained in the offering memorandum. Failure to retrieve any of this information, or procuring incorrect information could cause bank to be unwilling to finance the store acquisition, ultimately killing to sale transaction. 

Below are the key documents a buyer would need to prepare in order to successfully obtain financing for the acquisition of a retail store that’s for sale by owner. Also included are key tips and tricks for first time buyers to efficiently write these documents in a manner that bankers expect to see them. 

  1. Business Plan: 

A comprehensive business plan outlines the company’s mission, objectives, target market, marketing strategies, financial projections, and investment/ debt repayment plan. The business plan should highlight the purpose of the loan and how it will be utilized to benefit the retail store.

Business plans can come in a variety of different formats. Commercial bankers are usually accustomed to receiving in-depth powerpoint decks that clearly outline the store’s operations through aesthetically pleasing visuals and concise and clear text. 

Writing a business plan can be a daunting task for a first time retail store buyer, but it’s certainly not impossible. 

The first step is to come up with a cautiously optimistic business plan and forecast for the company. Normally, starting with the last three years of financials and forecasting out consistent margins and slightly growing revenue is an acceptable starting point. Make sure though to incorporate the impact of anything that may deviate from the steady growth that was just laid out (expansion plans, adding a new location, spending money on advertising, etc). 

You will also need to come up with the actual content for your business plan. However, retail store business plans have been made many times in the past so there’s no reason to recreate the wheel. To the extent that you can, utilize relevant elements of existing plans into your business plan. You can find existing templates to fill in at websites such as slidegeeks, which hopefully saves you significant time.