Borrowing money to buy a business

Mat07

Hi everyone

I have done a bit of research but wanted some advice.

We want to buy a business but will need loan. We own our own house which is worth around 300k. There are 2 business we are looking at buying one is worth around 700k and other 1.2million. We have a bit of savings but not loads. What we wanted to know is if a loan of that amount is possible. We have never owned our own business and both want to do something on our own rather than the 9-5 working for someone else. But it is all a bit overwhelming.

Many thanks in advance

MorningcoffeeIV

It'll depend on the business.

Take your business plan and forecasts along to a broker or two. Consider also why the business is being sold.

Grumpy_chap

Mat07 said:

Hi everyone

I have done a bit of research but wanted some advice.

We want to buy a business but will need loan. We own our own house which is worth around 300k. There are 2 business we are looking at buying one is worth around 700k and other 1.2million. We have a bit of savings but not loads. What we wanted to know is if a loan of that amount is possible. We have never owned our own business and both want to do something on our own rather than the 9-5 working for someone else. But it is all a bit overwhelming.

Many thanks in advance

What security is there for the lender?  
Your own house won't be sufficient for a £700k or £1m loan.  Do the business include physical assets that might serve as security?  (For example, a guesthouse.)
Are you looking to buy both business or is it an either / or?

Any lender will want to see the experience you have to run a business in the field your are investing in and also your business plan plus personal budget.

MalMonroe

Hi, there are two worrying parts to your post - "We have never owned our own business" and "We have a bit of savings but not loads."

There's some information in the following link about running your own business-

https://www.moneyhelper.org.uk/en/work/self-employment/thinking-of-starting-up-in-business

I agree with others that you are going to need a business plan. Even if both businesses are currently thriving, you need your own plans to present to a lender. There's more info in the link.

Also don't forget that sometimes, even when taking over a successful business, you have to work more hours than the usual 9-5 initially and maybe beyond - and if there are any employees, their futures are in your hands. You need to know what you are doing. You'll also have to know - or employ someone who does - about keeping records, including financial records, etc. You say you have done a bit of research - but you need to do a lot of it because this is a serious thing you are considering.

I'm sure any lender would be happy to discuss your ideas and business plans with you both but if they don't think that it's a good idea to lend you money then the decision will be taken out of your hands. Please take care as this is something you've never done before and it could end up proving costly if you don't research and prepare properly.

All the very best to you both. 

macman

You own a house worth £300k, but what is the equity in that? No mortgage?
Please don't consider using your house as security to buy a business (or two businesses).

MEM62

Based on the assets that you currently have, I think that you are way off being in a position to buy either business.  You are asking the lender to take the majority of the risk and, by your own admission, you have never run a business before.  You may have to think of something on a more modest scale to begin with.    

TripleH

Who are the key people for generating income in either business (if there are)?

How cash rich is either business?

When you buy a business with loans you can find they become less profitable as you have large debts to service  the previous owner might not.

You also risk loosing the key people who generate the turnover and find you aren't as successful (owners may misjudge how important they really are)

[Deleted User]

@Mat07 you've not given us any clarity - how are you progressing with this ?

tacpot12

This is what happens when you buy a business and have no experience of doing so: We moved to paradise of Costa Rica, but it quickly turned into hell | Metro News

macman

They only lost £29k; the OP is considering sinking £1.3m into this unspecified business...and they don't appear to have more than £300k to start with...