Thoughts of becoming a business owner?

ilkz

Please bare with me as I am a complete newbie looking into becoming a business owner.

My query is wether the below is possible,

Currently own a flat that is being let out with tennants in but considering parting ways with it to fund a venture into opening a business, unless it is possible to keep somehow!?

Mortgage on the house we are currently living. Both employed fulltime, one of us is likely to leave our job if we decide to jump on this venture.

Flat worth approx £250k (owned outright, mortgage free)
To purchase business worth around £750k (I'm assuming that with a sizeable deposit, the rest can be financed?!)

Apologies if this seems completely niave and thanks in advance for any replies that may point me in the right direction.

motorguy

ilkz wrote: »

Please bare with me as I am a complete newbie looking into becoming a business owner.

My query is wether the below is possible,

Currently own a flat that is being let out with tennants in but considering parting ways with it to fund a venture into opening a business, unless it is possible to keep somehow!?

Mortgage on the house we are currently living. Both employed fulltime, one of us is likely to leave our job if we decide to jump on this venture.

Flat worth approx £250k (owned outright, mortgage free)
To purchase business worth around £750k (I'm assuming that with a sizeable deposit, the rest can be financed?!)

Apologies if this seems completely niave and thanks in advance for any replies that may point me in the right direction.

I guess there is some viability to it, however not sure who would lend out half a mil these days - there would need to be a very high level of confidence that you knew what you were doing and the business was viable.

I assume you know the business area that you're proposing to buy into and have done your due diligence on the business(es) you are looking at, but is there any working capital required to keep the business going? eg, capital to buy stock, capital to pay staff, etc, etc.

Also, is there any stock to buy and how is that valued?

That sort of debt hanging over you could force you personally into bankruptcy if it all went wrong - taking all your own personal assets and your own home with it, so you might want to look at ways of establishing this business as a limited company.

colino

I think you should sit down with a good business advisor to trash out your plans. Remember to mention you currently own outright a business asset with an income (but live in a house with a charge over it).

Pennywise

It will depend on how the £750k asking price is broken down.

If a large proportion is freehold or long leasehold property, then you've a chance of borrowing the £500k as long as the property is valued higher, say, over £600k.

If it's a short leasehold property, or most of the "asking price" is for goodwill, stock, equipment, etc., then you've no chance I'm afraid.

Banks will only lend large amounts secured against property, and even then it's only to around 75%/80% of the value of the property secured against.

They won't lend big amounts for goodwill, equipment nor stock - what they class as "unsecured" - you'd be lucky to get £50k loan against unsecured assets, let alone £500k.

Don't forget you also need "working capital", so you'd need to borrow more than £500k on the figures you've given as you'd need a few tens of thousands to cover upfront costs such as deposits, more stock, wages, etc., before the customers pay you.

You really need an experienced accountant and an experienced solicitor to work with you, firstly to check that the business is worth £750k (many businesses are put on sale at silly prices!), and then to prepare a business plan which will demonstrate whether it's affordable given your circumstances.

ilkz

Thanks for the replies everyone, very informative. Looks like the next step would be a business advisor or accountant to see if the numbers add up.

The business is freehold, however, to throw a spanner in the works, we have no background in this area.

I have requested copies of the last 4-5 years accounts to have a look and will update this thread in due course!