Buying a child care or private school

buying-a-child-care-schoolBuying a child care or private school brings many challenges. No matter how much experience the buyer and the seller have, each transaction it’s different. They will need to deal with real estate contracts and negotiations and sometimes financing. LLUNA Investments can help with all of that.

Finding the right school 

When a school is offered for sale, it is always kept confidential. They are either advertised with no information or not advertised at all.

This is the in best interest of everyone involved; if the teachers find out the center is for sale, they get nervous about their future in the company. If parents find out before hand they also worry, and they reach to the teachers for more information.

Contracts and negotiations

Commercial real estate contracts and Purchase Assets Agreements have many clauses to be negotiated.  There is far more involved than price.  Buyer needs to deal with things like inventory of assets, due diligence periods, non-compete clauses, leases, and much more.

Most sellers will allow some basic information to be shared with a well qualified buyer, but sellers are exposed to an onslaught of buyers and, not knowing which ones are serious, they may choose to hold back certain information. To gain insight into the finances of the school, an executed contract will be required in most cases. This is fine; no need to panic. Contracts have a due diligence period that will allow to verify all statements.

Financing

This is an especially challenging part of the process. Financing a business is not like financing a residential real estate transaction.  SBA guarantee loans, seller financing, home equity loans are all commonly used. We at LLUNA Investments can help with financing though an SBA-approved lender if the buyer and the business qualify. Financing is available for buyers acquiring businesses with or without the real estate, starting at only 10% down payment and up to 25 years.

The most basic eligibility requirement for SBA loans is the ability to repay the loan from cash flow, but the SBA also looks at personal credit history, management experience, collateral and owner’s equity contributions.

All partners with 20 percent or more equity in the business, will be required to personally guarantee the loan and will have to be approved.