Loan/finances to buy a business & leasehold info

shomk

Hi
My husband and I are looking at the possibility of buying a business. My husband has been out of work for some months and we have very little income and quite a bit of debt, so we assume we would have to sell our house to buy a business.
We have seen a business for £165,000. We are getting our house valued but would guess its worth around £200,000. We have debts of around £30,000 (bit of a mess which has left us with a poor credit score no doubt) and our current mortgage is £170,000.
So realistically, before we approach a bank or get too far into the idea, what are our chances of being lent the money for a business? We could pay off our debts with the house sale, but have bad credit. I undersatnd that buying a business puts you in a slightly different position when asking for a loan than simply buying a home due to the income generated.
Also, it is a leasehold property...I have a little experience with these...the leasehold is for 15 years with 9 years left...is this OK? I thought a longer lease may be needed for a decent business loan??
Any advise is welcomed!!
Thanks All!

chalkie99

There are dozens of questions which could be asked but, first and foremost, you would be looking at basically a 100% loan and I cannot see that is possible in the current climate.

It's a biggish chunk of money - is the business something in which you have expertise and is there a smaller (read cheaper ) way of starting out?

shomk

Yeah, just looking around at business mortgages I see we would need a pretty big deposit!
We do have experience so thats not a problem. I do think its a bit over priced compared to other like (and better) businesses on the market, but I dont know why!
Thanks

paulwf

Have to agree with chalkie you potentially raise dozens of questions. The first one I would ask is what are you buying that costs £165K? That is a heck of a lot to pay for a business that doesn't include property.

Given the scale of the business you're also going to need a lot of money up front for a survey, legal fees, accountancy advice and loan fees. Presumably there is also stock or other essentials that come with the business that you'll need to buy. You will undoubtedly have your own plans to improve the business and these will require money. This is a very very rough figure but I'd want £50K available funds or at least access to that amount of credit if I was buying a business of that size.

Basically thinking that to run a £165K business you only need £165K is totally wrong.

So many other questions but perhaps you could give us more info about the nature of the business first OP?

paddyrg

Remember cash is king. Cash tied up in stock is useless to you, especially starting up, especially if it is all the old junk the last owner couldn't shift. But if you reckon you can get about £170k in cash, you can't afford a £165k business comfortably as it will need investment to make it pay - and the vendor clearly couldnt't make it pay enough as-is, or wouldn't be selling.

Do you mind me asking, what do you get for the £165k? It is a lot of money, it might be better value to start in opposition with (say) £30k in stock and a load of cash in the bank to advertise and poach clients from a closing business - then you could pick up the old business for a song when you have spoiled the market for any potential buyers if you wanted it.

steve1980

£165k for a leasehold business is quite high. Can you say what the business is and rough nett profit figures?

oldoakey

Frankly I don't think any bank will lend you the money you need to buy this business.
There are also many ingoing costs to consider such as rental 3 months in advance in addition to those stated above.

It is difficult to give any decent advice without more information as to the type of business and more importantly the turnover and nett profit margin.

Don't get excited by the dream its a very serious thing to sign a lease, make sure you are thinking straight with your head and not your heart.

bris

You would need assets to cover the loan if a bank was to even consider you. The fact you are selling your house takes away any risk to you as far as the banks concerned. You have nothing to lose if it all goes wrong, the banks would be the only loser. Sorry but you have no chance of securing funding. The banks are very cautious in this climate and even with security it is still very difficult.