Business Loans for Beginners

19lottie82

Hi - I don't really know where to start with this one, or if it would even be a possibility, so any advice / opinions would be appreciated.

My husband is in a trade and a family member has a business which he helped build up a few years ago but he now works for someone else (same trade).

Anyway family members business is well established and has a steady income, with low outgoings. However family member is getting older and their health isn't great, so they have mentioned selling in the not too distant future.

The price would be around £100k. I own a flat which I rent out, and I think there is about £40k equity in that, which I could sell. And we could prob scrape together another £10k.

Would getting a business loan for the remaining 50% be a possibility?

We do own our own home but there isn't much equity in it, bar the deposit we put down when we bought it just under a year ago.

As I said it's a great business, the books prove it, and my DH has the knowledge to walk in and make it do even better IMO.

I've googled "business loans" but the results only seem to throw up companies I've never heard of, or banks that will only lend £25k Max.

TIA

[Deleted User]

You'll need to put together a business plan and go and see the bank. Online apps will only give you personal loans.

19lottie82

Thanks zx81, I will make an appointment with my bank for a chat, to see what our realistic options are, before submitting an informal proposal.

CKhalvashi

The best bet is to speak to the bank. You may be able to use your property (assuming it's owned) plus the flat as security for a loan.

Another option is seeing if the relative will part finance the sale from future profits (as in you pay £x, the rest is paid in monthly payments over x years).

It was how we acquired the current office (20% deposit, paid over 3 years with 3 months breathing space at the beginning), and AFAIK quite common in business.

dealer_wins

Someone wanting to sell their business (even a family member) is going to talk it up and say how great it is.

Check and double check the books thoroughly.

tidds

When i've seen and been involved with business purchase generally you rarely pay upfront. You tend to pay a certain amount deposit and the rest is from the earnings of the business. Any business that wouldn't allow this model is one you probably wouldn't want to buy, as after all if they aren't confident you'll earn some revenue why would you want to buy the business?

Think of this entirely as a business transaction, take away the family element. It's really important to do so and please consider so carefully before putting your property on the line.

MEM62

tidds wrote: »

When i've seen and been involved with business purchase generally you rarely pay upfront. You tend to pay a certain amount deposit and the rest is from the earnings of the business. Any business that wouldn't allow this model is one you probably wouldn't want to buy, as after all if they aren't confident you'll earn some revenue why would you want to buy the business?
No way I would enter into such an agreement. If you are the seller where do you stand if the purchaser is clueless and wrecks the company within a year? You don't get the rest of your cash! I have seen it happen but the seller takes a big risk.

Think of this entirely as a business transaction, take away the family element. It's really important to do so and please consider so carefully before putting your property on the line.
Solid advice. Have the books liked at by an accountant that you trust. On what basis has the valuation of £100K been arrived at?

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bris

tidds wrote: »

When i've seen and been involved with business purchase generally you rarely pay upfront. You tend to pay a certain amount deposit and the rest is from the earnings of the business. Any business that wouldn't allow this model is one you probably wouldn't want to buy, as after all if they aren't confident you'll earn some revenue why would you want to buy the business?

Think of this entirely as a business transaction, take away the family element. It's really important to do so and please consider so carefully before putting your property on the line.

And this is absolute nonsense.

19lottie82

tidds wrote: »

Think of this entirely as a business transaction, take away the family element. It's really important to do so and please consider so carefully before putting your property on the line.

Hi, thanks for the reply.

Don't worry, I don't really take anything to do with my inlaws, so there isn't any "family" element on my side anyway.

As I said it's really just food for though at the moment. If we do decide to take it further I will make sure that a proper valuation is undertaken. £100k is just an up in the air figure right now.