Banks Say No B/c Of Inc's Tax Returns
I am trying to buy a multi-use building which has a gas station w/ a convenience store & 3 apartments. The current convenience store is closing up shop & another one will rent the space in its place. (Put aside all environmental & gas station equipment concerns b/c a Phase 2 has been done & it's AOK & we've gathered info on the tanks, etc.)
So, my contract says I am going to buy the building, the land, & the convenience store inventory (equipment is included in the purchase price of the building). I am NOT buying the convenience store business nor the goodwill of the business.
I prepared a thick packet of info for several bankers: Phase 2 environmental study, 3 yrs personal tax returns, full personal financial statement, income projections for convenience store, rental income projections, etc. Some lenders also requested the current convenience store tax returns and profit & loss statements, which I gave them, after specifying what I already told you above (I'm only buying the building not the business). I specify this b/c the convenience store shows losses: the owner doesn't know how to run a business. $7700 in one year on bus travel? For a gas station? Paid $23,000 in lease costs 1 year & the next year paid ZERO? Basically, their numbers are screwy & can't be correct, i.e. someone's been avoiding Uncle Sam. There's NO WAY I will get a loan based on these numbers.
You might be thinking,"Why would you want a building / business that is not making money?" Well, I'm not buying it for the building or the business. I'm buying it because the LAND across the street sold for $800k 3 years ago, & it's just slightly larger than the land that I'm trying to buy. And mine is cheaper AND includes the building! (I think it's a good deal.) And it's at the corner of an intersection w/ a stoplight & in the center of town & the property values are skyrocketing because it's at an underdeveloped beach vacation island that's taking off. I have another individual coming in who will rent the convenience store / gas station space and the business will be his, so I'm not worried about that either.
I have contacted 9 different lenders & 3 have rejected the plan outright based solely on the fact that the convenience store tax returns show losses. What do I do? Why do they take into consideration a business that won't be there anymore after I buy it? It's obvious these people are hiding their profit - they claim to have made only $67 on the sale of beer for 2003!!!!
Why can't I simply get a loan for the land and the building, NOT based on the poor management / record keeping of the present convenience store owner? Can anyone advise me on this? Does anyone have any suggestions? Thank you in advance - you're all so smart! I luv TCI!!
If the rest of your package is strong and your new convience store tenant is strong I cannot see a lender turning you down because the guy who's not going to be around anymore is cooking the books on his income taxes (in a cash business? never. Keep shoping for lenders-- there are co's that specialize in these kinds of deals.