Buying a Business – Raising Finance
Raising finance for a business isn’t always straightforward. We’re well past the time when you could walk into your bank and then walk out with a loan. Or when you had a dedicated bank manager who you could call up directly. Now it’s all call-centres, complex forms, online chats and jumping through hoops. You never can be sure what each lender is looking for.
But if you are thinking of buying a business, what factors are key to lenders when they are deciding if they can provide you with a loan? From our years’ of experience, lenders mainly look at these four:
No lender will take on all the risk. Every single lender will expect you to make contribute (usually a deposit) towards the purchase of any business. The amount required will be determined by several factors, such as the security provided and the type of finance required.
There are different types of finance available depending on what security is provided. So, whether the business operates from a freehold or leasehold property will have a direct impact on the options that are available. Some lenders may also consider additional security, such as a property as part of any transaction.
Obviously, this is an important one! What the levels of turnover and profitability are is key to any assessment as to the finance available to you. Profitable businesses are more attractive to lenders, as they need to take confidence in the fact that the business can afford the loan repayments and the owners remuneration.
This last point is not one which a lot of people consider. Lenders do place quite a bit of emphasis on who is borrowing their money, and consequently what their experience in the relevant industry is. This can be a key factor determining the size of the loan available. Lenders will also look at the borrower’s financial position and credit history.
As you can see, business loans can be confusing! There are many different criteria which lenders weigh-up before they concluding that they could support a deal.
What does this mean if you are looking for finance to buy a business? It means that it’s best speaking to someone who has intimate knowledge of each lender, their appetite and how they like to be approached. There are always options available for those who want to buy their own business.
By Joshua Ejdelbaum – ASC Finance for Business
ASC Finance for Business are a Commercial Finance Brokers with over 45 years’ of raising finance for small business owners. If you would like to speak to ASC about raising finance for your business, click here: www.asc.co.uk/yourlocaloffice