Financing the purchase of a business

[Matt007]

Hi
Not sure if this is the right forum or not, but i'm researching how to purchase a business. I've been made redundant twice in 6 months. I'm not going back there again, and so I'm researching if purchasing an existing business may be for me.
I'd like to hear from people who have, who've done it in normal ways, creative ways, who provide finance and so on so I can get as many perspectives as possible.
Any advice or input would be appreciated. Not looking at specific sectors or industries just yet, or price ranges, just working out the mechanics of it.

Thanks
Matt

 

[lizzie]

talk to bayview - he's in the process of doing similar

 

[evand]

The best way is to get a LOC with property equity and pay the interest with the business profits. (LOC cost circa 5%, return from business about 20%-30% = no brainer)

You can pay the LOC back over time but thats up to you.

Do you have property equity available?

 

[Hulkster]

A business has a value of Zero to a bank so you can't borrow against it to fund the purchase. You really need cash or equity or both.

 

[Player]

Hey Matt,

sorry to hear of that news. Lemons to lemonade mate.

Property equity is the simplest way. Interest rate would be lower than a strictly commercial loan.....and I could just imagine the hoops you'd have to jump through in this credit climate for the latter.

More control with a resi LOC as evand suggests and also more flexible.

Have a look at this thread by BayView

http://www.somersoft.com/forums/showthread.php?t=47824

 

[Peter_Tersteeg]

There are established and proven businesses out there which you can borrow money against. Proven franchises are the most common, but lenders are still conservative with LVRs like 50%.

Also keep in mind the purchase price is not always the same as the result of a business valuation.

If you've got property equity, it's by far the easiest and cheapest way to go, but be careful about how you approach lenders. In many cases they'll set up an expensive business loan, secured by residential property if they can get away with it.