A bit of history: My wife and I purchased a failing furniture store from a retiring couple 3 years ago. 

• Year 1: lost $80k took no salary
• Year 2: lost $30k took $5k salary
• Year 3: Break even took $80k salary... and that's through a pandemic & being locked down for 8 weeks. 

We have been investing heavily in growth and it has been paying off: We are currently running at 100% year over year revenues. 

There is a building we would like to purchase for right around $2 million including construction costs. It comes with 1 under market tenant, but the other 60% would be our store. We are currently paying $10k in rent(and CAM) and we think the monthly payment would come out to $11k net. 

We are looking at SBA financing, but the banker it telling us we need years of profitability. Something doesn't seem right. So I am reaching out to the financially knowledgeable in Bigger Pockets! How can we get this deal done? Could we BRRR it? Are there other financing sources we aren't looking at? Or can you explain to us what the problems are? Because if we can't purchase a building, I'm not sure how anyone could.

Other data points: 

• The business bank account has $300k in it. 
• We are generating $5-10k free cash flow a month, starting in October
• We have a SBA 7a loan we used the to purchase the business, and there is enough cash to pay it off.
• As owners we have $1 million portfolio of stocks, and paid off house. 
• The building would require a sizable construction loan: $300k, but it's a super upgrade from our current location. 

Please bring me all your best bad ideas!  

Thanks in advance. 

Originally posted by @Matt Hubbard :

A bit of history: My wife and I purchased a failing furniture store from a retiring couple 3 years ago. 

• Year 1: lost $80k took no salary
• Year 2: lost $30k took $5k salary
• Year 3: Break even took $80k salary... and that's through a pandemic & being locked down for 8 weeks. 

We have been investing heavily in growth and it has been paying off: We are currently running at 100% year over year revenues. 

There is a building we would like to purchase for right around $2 million including construction costs. It comes with 1 under market tenant, but the other 60% would be our store. We are currently paying $10k in rent(and CAM) and we think the monthly payment would come out to $11k net. 

We are looking at SBA financing, but the banker it telling us we need years of profitability. Something doesn't seem right. So I am reaching out to the financially knowledgeable in Bigger Pockets! How can we get this deal done? Could we BRRR it? Are there other financing sources we aren't looking at? Or can you explain to us what the problems are? Because if we can't purchase a building, I'm not sure how anyone could.

Other data points: 

• The business bank account has $300k in it. 
• We are generating $5-10k free cash flow a month, starting in October
• We have a SBA 7a loan we used the to purchase the business, and there is enough cash to pay it off.
• As owners we have $1 million portfolio of stocks, and paid off house. 
• The building would require a sizable construction loan: $300k, but it's a super upgrade from our current location. 

Please bring me all your best bad ideas!  

Thanks in advance. 

Sounds like you need to talk to some more banks and credit unions. They are all different, have different appetites and offer different rates and terms. SBA requires a lot of paperwork and time and some lenders, even approved lenders don't lie to mess with them. Make sure you put together a complete detailed financial package for the lender including the executive summary of the property and business plan, your last 3 years tax returns for you and the business, current P&L and Blance sheet for the business and updated PSF.

@Greg Dickerson Thanks for the reply. Doesn't the SBA also guarantee the loan?  Why wouldn't that be the benefit of the extra paperwork? 

And yes, we have all the tax refunds, P&L, etc. We make sure all the numbers are there and accurate. 

@Matt Hubbard It would strike me you should be able to get an SBA loan.  The way we got our first commercial building was through an SBA loan, the business had not shown profit, but the guarantors were in decent financial shape.  Have you shared personal financials with the bank? We did have to have a liquidity covenant as part of the loan, but we were fine with that at the time.  I'd also state if you're personal financials are strong, you dont have to go the SBA route.

@Matt Hubbard , I would look at other local banks. I purchased a vacant, 4-office commercial building without an SBA loan. My accounting practice was going to be the anchor tenant, and cover most of the expenses, but I still needed to at least one more tenant. The loan officer found a way to get it done. 

Hope this helps,

These are both good points, thank you. That gives me hope. We have bought and sold many houses, but this is our first commercial purchase.  I think we are going to have to put together a road show and visit a whole bunch of banks. I might even talk to a hard money lender as well. 

Thanks all. 

Talk to more lenders. Realize they are betting on you personally as well as the financial picture. So make a good case for your investment. Did you offer your personal assets as collateral? (Not advocating it just saying the bank usually would not have too much interest in personal assets unless they can put a lien on them somehow to do the loan).