Out of my depth?

TreacleTracy

Hi People

I am a single mum currently juggling a few jobs around school hours for little money, though working flat out. I have seen a business I really quite fancy the idea of. It is a small catering situation - small shop with the house and also supplying some local restaurants etc along with events etc. A very highly profitable business seeling for around £600k. Now my question is how do business loans work (I assume I would need a business loan although it would be the house I would hope to buy that comes with the business). I have savings of £7k and I have a house worth approx £250k (with a current £70k mortgage). In an ideal world I would let my house out and move to the business property, although I do realise I'd be having no capital to put in to that business, so that is just in an ideal world!.

I'm just wondering realistically if I have any chance of borrowing that sort of money or if I'm completely out of my depth!

lincroft1710

By my calculations, assuming your house sells for £250K, you pay off mortgage, leaves you £180K equity. Your savings will be swallowed up by fees. so you'll need a loan of £420K. So with staff costs, shop costs (heat, light, insurances, waste disposal, water, non domestic rates etc) could you even afford to pay back a loan?

Just tried a commercial loan calculator. At 2.5% over 20 years, monthly repayments on a £420,000 loan are nearly £2,250.

zygurat789

£600,000 is an awful lot of money.
Have you seen accounts, what does highly profitable mean?
Unless you see certified accounts do not even think about it.
For this sort of money I would expect, at least a turnover of £1.2m and a gross profit if £600,000 pa and a net of £100,000.

zygurat789

lincroft1710 wrote: »

By my calculations, assuming your house sells for £250K, you pay off mortgage, leaves you £180K equity. Your savings will be swallowed up by fees. so you'll need a loan of £420K. So with staff costs, shop costs (heat, light, insurances, waste disposal, water, non domestic rates etc) could you even afford to pay back a loan?

Just tried a commercial loan calculator. At 2.5% over 20 years, monthly repayments on a £420,000 loan are nearly £2,250.[/QUOTE]

That alone would require a net profit of £33,750 to cover it.

lincroft1710

zygurat789 wrote: »

£600,000 is an awful lot of money.

I think most of the asking price is in the property, which includes living accommodation, hence the high figure.

Opinion

* What is it about the business that you "fancy"?
* Have you ever worked in the catering industry before?
* Have you run your own business before?
* As others have said, have you seen certified accounts?
* It may be supplying other businesses now but that doesn't guarantee they will still want to be supplied if the current owner leavers the business. How much of the turn over comes from that area?
* How will you make time to run the business? Catering is working around other peoples time constraints- breakfasts, lunches, dinners; it's not just a 9-5. Early starts to prep for the day, late finishes etc.

zygurat789

lincroft1710 wrote: »

I think most of the asking price is in the property, which includes living accommodation, hence the high figure.

Then the property needs valuing and taken out of the business price.

bris

Minimum deposit would be 30% but realistically they would be looking for 50%.

3 years accounts as submitted to HMRC would need to be impressive to say the least for the banks to even consider it with such a high price, you can get a Macdonalds drive through for that.