loan to buy a company

bouncydog1

You also need to get an accountant to look at the books so that they can see the debt ratios etc. etc. What are the credit arrangements - have there been bad payers in the past etc. Cashflows etc. etc.

You really need to find out why the current owner wants to sell and how they have come up with a valuation -it could be wishful thinking on their part! You also need to research the market to see what is happening with other similar companies e.g. have any gone to the wall recently and why.

jayremoh

whysitallsocomplicated wrote: »

Hi

Do you work for the company you want to buy?

If so, just a thought, but would it be worth discussing a VIMBO type situation?

You could tie any payment schedule to the a % of pre tax profits so if you have a bad year you are only paying out a % of profit realised rather than a set amount agreed in advance.

Once you have your P&L forecast (conservative) you could see what that % would need to be to repay the purchase price within the time limit required. You could have an agreement that any capital outstanding at the end of that period would attract an interest rate of X. As you reach the end of the period you wil know how much capital was outstanding and how much you would then be paying in interest and could refinance if you could get a better rate somewhere else.

hmm, interesting.

i need to do some reading on this...

nomoneytoday

Are there any barriers to you setting up another company doing the same thing for less than £1.2m?

industryinsider2

nomoneytoday wrote: »

Are there any barriers to you setting up another company doing the same thing for less than £1.2m?

That's the real question. A private purchase is basically the most expensive way you could acquire that business. If you're looking at a business that you're interested in devoting your life to, you believe is a viable business and you think there's growth in the market, why are you even considering buying it?!

Why not set up a competing operation? You know that it's a goer, your competition is owned by someone who wants out so they should be relatively easy to beat and you could most likely do a trade purchase of their contracted customers at a fraction of the £1.2mil a year or two down the line when their business is on it's knees (book value of contracts is normally a 3 x multiple of revenue, rather than a sale which is generally a 7 - 10 x multiple of PBT)