[mbm]

i am doing research into the availability of financing for purchasing/running a small horse business.

Specifically i am looking for info on small business info for less than 750k

Has anyone used the SBA for this kind of thing? or has anyone gotten financing from other sources?

i would love to hear your stories etc.

Please feel free to pm me instead of posting if that is more comfy for you.

Thanks in advance.

[Woodland]

You need to do a good business plan with lots of comparisons. And then shop it to several banks. You need to be turned down by two under their standard business lending to the apply for an SBA guarantee loan. At least that was how is use to be.

My advice - having been there borrowed that and lost it - DON'T!

You have to understand that the $750K is secured only by land traditionally. Land values are bottoming out right now. You'd have to be in the 800's FICO to borrow - Maybe 760 will get it done with 20% down. You have to have 2 YEARS worth of available operating expenses and then hope for two EXCELLENT years in this DOWN economy to be on your feet. And even then you are not "safe". Get a group of pissy boarders and you could lose your farm! Big barns = flocks of boarders and training horses that come and GO on a whim. They have to come from somewhere and then you have to understand they will go somewhere someday.

The first & last time I built a place from scratch I did it investing my own capitol without any liquid loans. I had a small mortgage that I paid double on to get it paid off. The end result is a simple manageable PAID for place with no wolves at the door. It was the middle one the BIG place with a business partner and LOANS that FAILED!

Do your business plan. Talk to your financial adviser(if you do not have one get one) and go from there. $750K is A LOT of money. You would need over $500K in income from your business yearly to make that feasible. I do not know what kind of horse business you are interested in, but there are precious few that bring in that kind of dough!

[mbm]

thanks for the insights !

i dont want to give specifics - mostly becuase it is all in the"dreaming" stage right now...

but, suffice to say that

a) this is in Northern Ca where everything is expensive (but 750k was just a number pulled out of my hat to give an idea of what i was thinking of as opposed to say 35k )
b) this would include an already in existences operation (current owner does very well indeed)
c) would also include a house for me to live in.... so biz and living all in one
d) it never occurred to me that i could get a biz loan for this kind of thing but someone suggested i research it - so here i am!

[Evalee Hunter]

You need to do a good business plan with lots of comparisons. And then shop it to several banks. You need to be turned down by two under their standard business lending to the apply for an SBA guarantee loan. At least that was how is use to be.

My advice - having been there borrowed that and lost it - DON'T!

You have to understand that the $750K is secured only by land traditionally. Land values are bottoming out right now. You'd have to be in the 800's FICO to borrow - Maybe 760 will get it done with 20% down. You have to have 2 YEARS worth of available operating expenses and then hope for two EXCELLENT years in this DOWN economy to be on your feet. And even then you are not "safe". Get a group of pissy boarders and you could lose your farm! Big barns = flocks of boarders and training horses that come and GO on a whim. They have to come from somewhere and then you have to understand they will go somewhere someday.

The first & last time I built a place from scratch I did it investing my own capitol without any liquid loans. I had a small mortgage that I paid double on to get it paid off. The end result is a simple manageable PAID for place with no wolves at the door. It was the middle one the BIG place with a business partner and LOANS that FAILED!

Do your business plan. Talk to your financial adviser(if you do not have one get one) and go from there. $750K is A LOT of money. You would need over $500K in income from your business yearly to make that feasible. I do not know what kind of horse business you are interested in, but there are precious few that bring in that kind of dough!

Woodland, you are full of the most mis-information I have ever seen in one post! We borrowed from the SBA to buy the farm we have now & almost nothing you wrote above is true.

I really don't have time to write it all out at the moment.

Call your nearest bank's commercial department & ask to speak with a commercial loan officer. Do what they tell you. You WILL need a terrific business plan (I recommend lots & lots of color pictures of cute kids & ponies if that is applicable to your business) so that much which Woodland said is true. The rest may have been true once but is not correct in recent years.

Yes, the SBA will guarantee loans for horse farms - the plan we used involved the bank loaning 50%, the SBA 30% & us supplying 20%.

If you have a farm credit that covers your state, I would talk to them, also.

www.midatlanticfarmcredit.com as an example

[Evalee Hunter]

I will take a few minutes & write a little now. I did what I said for you to do - called the commercial loan division of a local bank. The loan officer I spoke to said I had to do two things:

Get an appointment with the Small Business Development Center (in Wilmington, DE as we lived in Delaware at the time) & get help writing a business plan

and

Contact the CDC (Certified Development Company), a "front" or "division" of the SBA. The CDC we dealt with is located in Glen Burnie MD, outside Baltimore. They administer one type of SBA loan program (might be the 503 program??) which is supposed to help "poor" people get into business. I got a loan application from the CDC & we did two of those - one for the bank & one for the CDC.

We wrote a business plan & took it to an appointment at the Small Business Development Center where we learned we had to make it about 10 times as big. It ended up being huge - we made 3 of them, one for us, one for the bank & one for the CDC. We had loan approval less than 24 hours after handing them in to the bank & the CDC.

I think it is some kind of weird goverment joke to consider this a program for "poor" people. We had to give the CDC a $7,500 application fee when we handed in the loan application. Once we identified a property we needed all sorts of expensive things - a survey (not your regular old home mortgage survery) which was, I think, $3,000; an EPA phase 1 study (another $3,000, maybe?); an appraisal of the value of the property & business potential (maybe $5,000?) &, of course, we needed 15% down plus attorney fees. We were having a barn built so we needed a certified engineering drawing, even though the barn was built from a freehand sketch made on a piece of lined paper ($500 for engineering drawing). We needed an environmental impact study by a certified soil scientist regarding the excavation for the barn (only about $1,000). Yeah, they have some sense of humor to call this a program to help the "poor" get into business.

I would suggest you find your nearest Small Business Development Center. They can be a tremendous help. They are located all over the country & are associated with colleges or universities & have faculty to consult with you free. That was probably the best part of the whole thing.

When we closed on the farm (Aug. 04), the bank covered the entire 85% that was loaned to us. (I made an error above. I have checked the numbers since - the loan is 50% from the bank, 35% from the SBA & 15% down payment from us.) 50% was a regular loan & 35% was interest only until the final closing with the SBA, which didn't happen until April of the following year when the barn was finished & approved.

I nearly murdered a few people along the way, had many hysterical conversations, accused the CDC of being insolvent & running off with our money as to why they wouldn't close sooner & a few other unattractive behaviors, but we did get the farm, did get the loans & the business has been doing fine so far.

We formed an LLC. Actually, the LLC owns the farm. You might want to think about forming an entity. I am glad we did.

Anyway, check out

Farm Credit

Commercial Bank that works with the SBA (they are listed on the SBA site)

Small Business Development Center

Prepare yourself for a long, long haul & be sure to have around $50,000 above your down payment.

We did NOT shop the business plan to more than one bank. We did not have to be turned down by anybody to qualify for the SBA loan.

We did NOT need two years of operating expenses up front (we had NO money for operating expenses, except what could be earned as we went).

We did NOT need 20% down - 15% was the standard amount.

I would not waste money on a financial advisor - too many other things to spend money on & most financial advisors know less about money than I do.

If you are talking about $750,000 total ($637,500 borrowed, the rest from you), then you could probably scrape by with $150,000 yearly income from the business, as long as "break even" is good enough & you have some other income to cover your personal living expenses. You won't "break even" on paper when your taxes are prepared because of depreciation but $150,000 might well cover your actual expenses each year for the first couple or three years.

But issues like how much income you need & how you think you will achieve that are what is covered in the business plan.

You can go to some place like www.bankrate.com to make up mortgage amortization tables & see how much the interest expense will be in the first few years.

[mbm]

thanks for the insightful information.

i called my local farm credit and she said they dont do anything with equines - only commodities and production(?) she said this was a farm credit policy but i see that mid atlantic has a an equine division.

i will call the sba and look into the other items you listed.

and fwiw, the "horsey" part of the place is only one part of the revenue stream. there are a couple rentals too. and i have another job. so covering expenses wont be an issue..... it is getting the $$ that will be

[Wonders12]

Just out of complete curiosity, where in Sonoma are you? I'm curious because I'm captain of Sonoma State's equestrian team and just fascinated by the horse business around here. (I'm originally from L.A. so it's very different.)

We're also dreaming of a "Sonoma State Equestrian Center" but that will NEVER happen.

[YankeeLawyer]

That is odd. I know that at least some Farm Credits do horse operations. Does AgFirst cover your area?

[mbm]

i'm in sebastopol....

here is my local farm credit agency:http://www.agloan.com/

[Evalee Hunter]

thanks for the insightful information.

i called my local farm credit and she said they dont do anything with equines - only commodities and production(?) she said this was a farm credit policy but i see that mid atlantic has a an equine division. . . .

I bet your problem is that in CA, horses are no longer livestock. What a shame. I sure hope we can all keep horses classed as livestock in other states & keep horse boarding & such classified as agriculture. When you try to do a business, you are treated much better (by the government) if you are farming than if you are doing something with "pets". Around here agriculture is permitted on land where a "pet" business (veterinary small animal clinic, breeding kennel, etc.) would be prohibited, for example.

[MikeP]

Also check with your local Farm Service Agency (USDA) loan officer. It's hard to fit into the niche that USDA requires to qualify for a loan, but even if you don't, the Farm Loan Officer should be willing and able to give you advice about what's usually done in your area and how to go about getting your financing. Their services are free, and Farm Service Agency is a different outfit from Ag Credit or SBA.

[Chall]

Wow that opportunity sounds great, good luck.
You mentioned that the current owner "does very well indeed". Just wondering from whom you got that information, the owner, someone else, or maybe tax documents or the like. If the current revenue stream is a major factor in the equation you might really want to verify that.

[ESG]

I bet your problem is that in CA, horses are no longer livestock. What a shame. I sure hope we can all keep horses classed as livestock in other states & keep horse boarding & such classified as agriculture. When you try to do a business, you are treated much better (by the government) if you are farming than if you are doing something with "pets". Around here agriculture is permitted on land where a "pet" business (veterinary small animal clinic, breeding kennel, etc.) would be prohibited, for example.

Horses aren't considered livestock in Texas, either. The only way one can get an ag exemption with horses is to have a breeding operation.

[mbm]

Wow that opportunity sounds great, good luck.
You mentioned that the current owner "does very well indeed". Just wondering from whom you got that information, the owner, someone else, or maybe tax documents or the like. If the current revenue stream is a major factor in the equation you might really want to verify that.

yes, if i were to pursue this i would of course do my due dillgence incuding wanting to review their tax returns, financial statements etc.

however, just doing the math i can tell that if i were to leave it all as is (number of horses, etc) then i would be able to pull it off payment wise - of course this includes me paying "rent" on my house too.... i dont expect it all to be paid for by the various revenue streams....

but yeah - great opportunity! just gotta figure out where to get the funding

[ReSomething]

Watch out for that math, it may not be the same for you as a new owner! Sent a PM with more detail.

Good luck!