Business loan or increase mortgage?

miss.piglet

Hi,
I'm new to posting on forums so forgive me any errors. I'm after some advice. My husband and I are looking to buy a business which is closing locally due to retirement. We have a large amount of equity in our home (60%) so I was unsure - would people recommend getting a business loan to pay for the purchase of the business or increasing our mortgage to cover the costs? I am currently presuming we would be allowed to borrow more on our mortgage.
Many thanks

Pixie5740

What kind of business are you wanting to buy? Personally I'd be wary about securing the debt required to buy a new business to my home just in case it went tits up.

miss.piglet

Hi, thanks for your help. Yes, I wondered that. It is a bike shop which has been established for 20 odd years and we would just be looking to continue the business as it is currently run. We have seen the books and all looks good, so I was hoping there was not too much risk .... Would I be right in assuming that business loans would be more expensive than an increase in mortgage?

foxy-stoat

Go and speak to your mortgage lender first, they will probably ask you all the right questions for you to see a small business advisor to try and secure the funds that way.

Have you got a business plan, you cannot go to a lender and say I have seen the books and they look good !

Brock_and_Roll

foxy-stoat wrote: »

Go and speak to your mortgage lender first, they will probably ask you all the right questions for you to see a small business advisor to try and secure the funds that way.

Have you got a business plan, you cannot go to a lender and say I have seen the books and they look good !

Further to the above you will need a business plan AND be putting in a good % of the purchase price. As a general guide, banks traditionally lend circa 80% of the "BRICKS & MORTAR" valuation of any property assets involved. If there is no property, e.g. if the shop is rented, then they will lend a much smaller percentage.


The phrase banks use is that they want borrowers to have" their own skin in the game". i.e. if the business goes bust, there has to be pain for bother borrower and lender!

bris

Forget the books ask to see their tax returns.


Books can be deceiving, tax returns can't.

dealer_wins

bris wrote: »

Forget the books ask to see their tax returns.


Books can be deceiving, tax returns can't.

Best advice ever!

Brock_and_Roll

dealer_wins wrote: »

Best advice ever!

Lol, not sure about that! You should have seen my old man's tax returns!


His advise to me was:


"Always do your accounts in pencil"