Buying a business finance

Hi I'm looking at buying a business but I need finance where the best plan for this?

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  • motorguy
    motorguy Posts: 22,452
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    gavin7 wrote: »
    Hi I'm looking at buying a business but I need finance where the best plan for this?

    How much do you need?
    How much are you personally putting in?
    What's the business?
  • Pennywise
    Pennywise Posts: 13,468
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    What exactly are you buying? Is it just goodwill/business name/customer list, or is there property, equipment, vehicles, stock too?

    Different "assets" are best financed by different types of loan etc., i.e. a mortgage for property, lease or HP for vehicles/equipment, etc., Overdraft for stock.

    What is the price you are proposing to pay, how is it split between the different asset categories, how much of your own money are you putting in, do you have any assets to secure loans against, i.e. your own home?
  • bris
    bris Posts: 10,548
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    You are the best plan for this. You need 50% of the cost and security such as a house that will cover the banks losses should the worst happen.
    You also need a business plan or 3 years certified accounts showing the business in question.

    I don't suppose you will be back to update though.
  • gavin7
    gavin7 Posts: 34
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    It's 90k double glazing company,
    It's just good will name ect there is no real asset I was looking at putting down 30%
  • If you are about to pay £90k for a reputation, should you think about how you will build / continue the reputation going forward? I mean, could you spend half of that on building your own reputation from scratch. £90k i guess would buy you plenty of time to build one. presumably you have the skills and knowledge to run the business and the supply chain in place / equipment? If so, then how have they come up with the value?

    Is the seller retiring? If so, perhaps you pay them something based on how valuable that reputation ends up actually being - ie in the future....
  • Pennywise
    Pennywise Posts: 13,468
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    gavin7 wrote: »
    It's 90k double glazing company,
    It's just good will name ect there is no real asset I was looking at putting down 30%

    If you're not buying anything "physical", then I think the best option is seller-finance, where you pay the seller over a number of years from the profits made as long as the "goodwill" remains worth it, i.e. £30k upfront, then another £30k after a year of successful trade and a final £30k after 2 years of successful trade.

    Realistically, you're not going to get a bank to lend more than a few thousand on goodwill alone.

    And really you don't want to be giving them £90k upfront only to find out their customer list and reputation is worthless.

    Seller finance is a good middle ground - it also encourages the seller to be invested in the business, i.e. help you with any queries or introductions etc as if the business fails, they'll not get their 2nd and 3rd instalments!
  • motorguy
    motorguy Posts: 22,452
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    Pennywise wrote: »
    If you're not buying anything "physical", then I think the best option is seller-finance, where you pay the seller over a number of years from the profits made as long as the "goodwill" remains worth it, i.e. £30k upfront, then another £30k after a year of successful trade and a final £30k after 2 years of successful trade.

    Realistically, you're not going to get a bank to lend more than a few thousand on goodwill alone.

    And really you don't want to be giving them £90k upfront only to find out their customer list and reputation is worthless.

    Seller finance is a good middle ground - it also encourages the seller to be invested in the business, i.e. help you with any queries or introductions etc as if the business fails, they'll not get their 2nd and 3rd instalments!

    +1

    Thats where i'd be going too. Would be interesting to see the sellers response.
  • martindow
    martindow Posts: 10,198
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    I wonder how useful a customer list and goodwill is when we are talking about double-glazing. It's not the sort of business where people are regularly buying (unless the original installation was poor). Names and phone numbers of people who will probably not be coming back for decades seem valueless.
  • Pennywise
    Pennywise Posts: 13,468
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    martindow wrote: »
    I wonder how useful a customer list and goodwill is when we are talking about double-glazing. It's not the sort of business where people are regularly buying (unless the original installation was poor). Names and phone numbers of people who will probably not be coming back for decades seem valueless.

    Not necessarily. Not everyone has all their windows, doors and porches/conservatories replaced at the same time. We didn't. We've had them done piecemeal over the last 20 years. Been through a few different double glazing firms who we'd not use again, but more recently, we've found a reliable firm and have given them repeat work every few years - replacement conservatory about 8 years ago, replacement back porch 3/4 years ago and a replacement front porch last year. We'll be having our front bay window replaced this year and we'll automatically use the same firm without getting other quotes as their service is excellent.

    We've also recommended them to friends, family and neighbours, so they have got quite a bit of repeat business and referral work from us.

    Most firms also do other "plastic" work, such as guttering, soffits & fascias, drainpipes etc, so there is plenty of repeat work there too for happy past customers.
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