Buying a business . . . ?

[Obi-Haive]

I am not too knowledgable about all this so I was hoping you guys could give me some help.

My wife and I have found a retail business we are interested in buying the lease to. The only problem is that we have no deposit saved or anything like that. We do have a unit in Richmond, Vic for which we are currently paying a mortgage on but basically the equity that it has accumulated is our only asset.

However, judging from the books we've seen, the business is quite profitable and will only get stronger. It is located in the hub of a fast growing area and there are no competitors close by.

We would also be living in accommodation attached to the business, hence we'd be renting out our unit in Melbourne, which should neutralise (or come close to) our mortgage payments.

What would you say is the best way to look for finance to buy this business? Would a bank take into account the amount of profit the business has made in the last few years and sum that up with what we can bring to the table? Would they look at say loaning us the money for say just the plant value and then look at another loan for the stock and lease value?

 

[Papa G]

Use the equity you have in your unit as the deposit, show the books to your bank manager and if he is convinced the business is profitable enough to pay back the the rest that he will loan to you, then he will give you the rest of the money.

 

[Z_K]

Reason for sale?

I don't imagine you would have any problem with bank finance.

 

[Obi-Haive]

Reason for sale?

I don't imagine you would have any problem with bank finance.

The current lease holders are selling as they have other ventures on the go and are looking to move to Perth. The business seems viable enough.

Thanks for your help here fellas, we really want to get this business (we've already got our life in it planned out).

 

[Moo]

You need a business plan.

Also watch out that the owners are actually moving out and not around the corner. I would include a clause that forbid them from starting a business in the surrounding district for a period of time.

Just out of interest how mant times current earnings are you shelling out?

 

[Z_K]

Also, have you spent some time in the business during regular operation? I would spend a few weeks there, looking at processes, getting a feel for the clients etc etc. You can also plan improvements while the place is functioning. Saves them being able to talk nonsense at negotiation, too.