We wrote previously about the key factors that lenders consider before lending money for buying a business. But since each industry is different, it’s worth considering what can influence how you should apply for finance in each case.
Take, for example, buying a post office. Despite the constant reports that post offices are closing at an ‘alarming’ rate, they are actually a business that some lenders are very keen to support. We’ve highlighted some of the key points that lenders will take into account if you are applying for the finance to buy one:
1) Freehold or Leasehold
One of the first questions lenders will ask will be whether the post office is freehold or a leasehold. From a lending perspective, a freehold business provides the security for a loan, so is generally more attractive (although more expensive to purchase). Don’t worry if it’s not what you are looking for, as it’s still possible to obtain finance for a leasehold post office. You can take advantage of government schemes or use additional security against the loan.
2) Postmaster’s salary
This is the key benefit of a post office over another business. In addition to the income from sales, there is also a salary to be had for operating the post office. As lenders look to overall income and must ensure that any loan repayments can be met, this additional salary can prove to be a big help in meeting the criteria.
3) Other income: lottery, travelcards, cashpoints
There are multiple income streams for post offices. From the activities of the post office itself to other retail sales. But don’t forget that further income can be made from cashpoints, travelcard sales, or lottery tickets. This will of course help with turnover, or form part of any business plan or projections if required.
4) Experience
Lenders need to be sure that the new owners have the experience and know-how to be successful in their venture. They will often look for retail experience to support the application. The borrower will also need to apply to become a postmaster in order to run the post office. That may sound obvious, but once in a while, an applicant has overlooked this fact!
There are many things to consider when looking at a post office, and it’s important to remember not to feel overwhelmed by the finance side. After all, your knowledge and focus is on looking to run the business rather than getting bogged down in the intricacies of finance applications.
By Joshua Ejdelbaum – ASC Finance for Business
ASC Finance for Business are Commercial Finance Brokers with almost 50 years’ of raising finance for small business owners. https://www.asc.co.uk/FinanceForPostOffices
If you would like to speak to ASC about raising finance for your business, click here: www.asc.co.uk/yourlocaloffice
