[Closed] I have found a business to buy...advice?

In my (limited) experience you'll need to put your house on the line, or someone elses.

You'll need something to put towards it - remortgage house?
Its then a case of looking at the books and then possibly [s]imagineering[/s] writing down your business plan.
Good luck.

what if in only have £10k in my own house?

dad who owns 2 houses out right will guarantee loan so just a matter of building a business plan?

I dont really want to ask my dad. but he offered a while ago if i ever needed help.

Why is the competitor selling up?

Turnover means nothing, do you know if the business is profitable?

I could have bought a bike shop for £25k 2 years ago, turnover of over £100k, but the shop was not running at a profit so I walked away.

If it is profitable then good luck

Retiring i believe. Havent got to the stage of profitability yet. Its a high margin business so I am confident that it is profitable.

dad who owns 2 houses out right will guarantee loan so just a matter of building a business plan?

As Orangista says turnover means nothing.
Likewise I could have bought a bike shop a few years back for best part of bugger all 10k plus stock but the sum's didn't add up, it's now on it's second owner since I looked at buying it, and is just starting to turn a small profit according to the new owner, who won't tell me how much money he has had to pump in to get it to the state it's in now.

is there a way i can do it without him though?

Speak to the bank, your local business link will also be able to advise you on the various funding options be it bank/ business angels etc.

Depends on what industry you are in, but you may just be able to pick up the work/contracts without buying the business if customers know he is up for sale...

Other option would be to pay some upfront and defer the rest (maybe dependent upon trade) however, the vendor will prefer cash upfront for obvious reasons.

Credit lines are tough at the moment without security, there may be some grants out there - speak to you local business link who maybe able to point you in the right direction.

I doubt very much you would get a bank loan on a business that was not making a profit, its a huge risk for the lender.

josh1982 - Member

is there a way i can do it without him though?

apart from sucking the bank manager off, probably not.

thanks for the info........will get in touch with b link.

I am sure its profitable although not seen the history yet. Its health and beauty trade and is well known in the city.

fingers crossed and will try keep updated.....if not for your info but my release.

Banks are not the only source for business finance, they might have the cheapest rates but will want ALL your business bank accounts to be run through them and will have very strict criteria which you probabily won't fit by the sounds of it.

If the new business has a lease on a premises which you need to take over then it might be possible to secure against this depending how long the lease is for.

Speak to a good commercial finance broker as they will not only look at the banks but also the non high street lenders. If you want i can put you in contact with one or two. If your interested then send me an e-mail, its in my profile 😉

If you know so little about financing a business then I would suggest that you should seriously think again about buying it.

if its a Limited company check the history through Companies House , then ask to see the managment accounts

Get a copy of the latest business accounts. (Profit and loss Account and Balance sheet) Get an accountant to check (or if you are handy with a calculator do it yourself)the "Acid Test Ratio." It will give you a good idea of how much money the company has to pay its debts. Any good GCSE business studies book (or BBC Bitesize) will show you how.

Accountants could also do lots of other annalysis on the accounts ("Return on Capital Employed" etc) and tell you if it is a good investment.

And yes, companies house is a good source of info if the business is incorporated.

Good luck and get an independant valuation if you are going to go for it. (It could save you lots of money.)

Cheers,

Kips husband.

Get a copy of the latest business accounts. (Profit and loss Account and Balance sheet) Get an accountant to check (or if you are handy with a calculator do it yourself)the "Acid Test Ratio." It will give you a good idea of how much money the company has to pay its debts. Any good GCSE business studies book (or BBC Bitesize) will show you how.

Accountants could also do lots of other annalysis on the accounts ("Return on Capital Employed" etc) and tell you if it is a good investment.

And yes, companies house is a good source of info if the business is incorporated.

Good luck and get an independant valuation if you are going to go for it. (It could save you lots of money.)

Cheers,

Kips husband.

Forgot to say.... Banks will probably be willing to lend up to 50% of the business valuation. They will definately be looking for you to stump up the rest (to show you're commitment) and would probably be looking for a written business plan. (LLoyds TSB have a great business banking service and can provide Business Plan templates.)

thanks all..........

I am not sure if the comment

If you know so little about financing a business then I would suggest that you should seriously think again about buying it.

is relative as for running a profitable business i am fine and its the initial start up which i will need assistance with. Im confident my business ability is sufficient to operate a profitable business once in my ownership.

OK Pay attention and listen carefully.

Any business loan assessment by a bank is built around the mnenomic CAMPARI.

Prepare a business plan, whilst bearing in mind that the bank will be assessing as follows.

Character - Does the bank know you. Do you have good credit history, track record etc.

Ability - What is your experience?. Have you run a business before? Demonstrate that you have researched the opportunity and keep it relevant. Do you understand all the risks. Premises, insurance etc Is any body else around to help you with the areas in which you are weak. E.g, Finance. Have you completed a SWOT analysis of the business? If not why not?

Margin - Not really one you can answer, but the bank will be looking to make a profit out of you. Expect to be paying an arrangement fee of around 2% and a margin over base of around 4-5%

Purpose - What is the loan for. If for acquisition, is the price right? How has it been arrived at. Peoples idea of the value of their business is usually way too high. How long a term are you looking to borrow and have you considered the working capital requirements of the business. Working capital being the amount of money you need for timing differences between receipts (sales) and payments (wages, insurance, loan repayments, stock etc)

Amount - How much are you borrowing and how much are you putting in. You need to put in some hurt money. The more the better.

Repayment - [b]It's not only how profitable the business is, it's how quickly you collect the profits.[/b] CASH IS KING - most important rule of finance. Cash makes loan repayments not profits. Don't look like a dick and not include a cash flow forecast in your business plan. That means including your quarterly VAT returns, PAYE returns etc. See above re working capital.

Insurance - How will the bank get repaid if the business fails. We are in a recession and start up failure rate is high. The bank will want your personal guarantee and if your Dad's, supported, probably, with fixed legal charge or mortgage on one of the un-encumbered properties.

The above is not exhaustive but should get you thinking. You can PM me if you like.

Maybe your old man would like some income and he can probably get the cash far cheaper than you - or would he like to be a (silent?) partner?

Making a business work is hard enough without you trying to be the big man/woman.

first question id ask is what will you gain from buying over - esp if you already have your own business set up in that area - what is the area ? will there be a customer base in it (that you wont get anyway?)

i bought the current shop im in with all borrowed cash(cos it was a good deal)and i didnt have any!

£30k on a small firms loan guarantee scheme (now called something different i think)basically if you go bust the eu coffs up to the bank.you need a good business plan for this

£10 personal loan,i think i said a kitchen! id spent a year before trying to improve my credit rating(which is pretty easy,look at equifax and experian to see where you stand)

the shop at the time had a to of £275k but the profit had been consistently £40k for five years and the ave margin was 37% i hawked it round mates who were accountants,business people etc and got them to look at it(cheaper than a going to see a pro)