How to Finance your Business Acquisition

Facebook Twitter LinkedIn Mail Us

chan and naylor finance news

Your Boss Tells You that s/he Wants to Retire and Asks you Whether You Would like to Buy the Business

How Do You Finance It?

Of course there are a number of preliminary questions you need to ask:  is this a good business to buy?  Am I the right person to own a business?  Do I have the right structure to own a business?

Let’s assume that you have discussed these with your Chan & Naylor accountant about these and have the green light, what’s next?

There is a number of criteria that the banks use when looking to lend on a business.  But security and income are key.  So what are the options:

Does the business purchase involve bricks and mortar?  If the answer is yes, the banks have more confidence on what they are lending against.  Typically they will lend about 65 per cent of the value of a commercial premise while they might lend 90+ per cent if you also offer a residential property as security.

Does the business have adequate income to repay the debts?  A quick analysis of the business’ financials will help the bank assess if this deal stacks up.

In addition to the bricks and mortar, the banks may also lend against the value of the business.

What’s your history?  If you have been 2IC for the business and know how it runs the banks will feel comfortable – not so if you have been a specialist in one department of the business

Is the boss sticking around?  Some business purchases handcuff the current management to the business for a few years.  The banks like this as it is more likely to ensure a smooth transition – especially when there are performance hurdles for the current manager to achieve when s/he gets payments for the business

Related:  Does your Business Needs a Loan?  C&N Can Help

Who are the clients?  If there is one dominant client and she is wedded to the current management, the banks will be cautious.  But if there are many, the banks will be more relaxed.

Is there a plan?  Produce a business plan and the banks will be convinced you know where you are going.

In general business lending is easier than it has been for some time and the banks are hungry for business.  If you want to know how to buy a business, please contact your Chan & Naylor broker.

Have you Outgrown your Accountant - Contact Chan & Naylor

Disclaimer: This article contains general information; before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs. Click for more detail regarding this disclaimer.

Leave a Reply

Your email address will not be published. Required fields are marked *

Join our mailing list today!

Keep up to date with our latest news & updates!