Is a £300K loan impossible to get to buy business?

[dave1928]

If a business was making about £250k net profit how easy or hard is it for someone to get a business loan of £300k to buy it?

How would the bank look at it or want from the buyer? (as in house deeds as security etc)

On face value if a business is making £250k net profit per year a standard business loan would be paid off within 18 months easy so would a standard business loan be sufficient from the bank? or will they still require all sorts of security? even though the figures are very good.

Or is it impossible!!! for my mate who is asking this question. He is married and owns a house with about £15k in savings. (House is mortgaged)

Thanks for any feedback

 

[SpeedyExpressCouriers]

With such a figure they will almost definitely ask for some sort of security and yes a business plan would most definitely be needed.

 

[Richie N]

Most banks are asking for at least 50% down at the moment for loans.

 

[Esk247]

so the business is for sale at 300k it has a turnover of 250k a year.

your friend has 15k banked.

i think he's a little way off asking for a loan tbh. from the limited facts shown.

 

[Vending Siting Services]

The bank will also want management accounts of the current situation. Year end accounts are not a snapshop of what is going on today. Are there management accounts available, if not, before your friend even contemplates potentially buying this business, management accounts produced by an accountant will be essential.

What is the balance sheet like?

NatWest have incentives to lend, they are boasting about needing to offload £100m - cough, yes I said £100m! They are primarily targetting Franchise Companies but you never know, if they are not meeting their targets they may look outside the franchise model. The amount of borrowings can be as low as £25k and as high as £.5m. They are also talking about up to 12 months repayment holidays. Might be worth a go?

Barbara

 

[adventurelife]

If a business was making about £250k net profit how easy or hard is it for someone to get a business loan of £300k to buy it?

How would the bank look at it or want from the buyer? (as in house deeds as security etc)

On face value if a business is making £250k net profit per year a standard business loan would be paid off within 18 months easy so would a standard business loan be sufficient from the bank? or will they still require all sorts of security? even though the figures are very good.

Or is it impossible!!! for my mate who is asking this question. He is married and owns a house with about £15k in savings. (House is mortgaged)

Thanks for any feedback

If a business is making £250k net I would be extremely surprised if it is on the market for £300k

Having said that it does happen if owner wants quick exit.

Has he ran a business before? Has he a decent track history?

No matter where the money comes from in loan form security will be asked for unless he gets private investors.

Many, many different ways to buy a business if the owner wants to sell

Never ever is it what it says on the tin regarding the businesses and if the business was for sale at £300k making £250k net I would be more suspicious than normal and normal is exceedingly suspicious when it comes to buying businesses

 

[dave1928]

My first thought it sounded to good of price, but that's what's advertised he said. The actual figures are....£295k purchase price with £300k gross profit and net approximate £50k lower. Turnover is around £500k

My mate isn't serious in buying this as he scared to think of going into debt thatbmuch, much I was just wondering what banks are like to loan money in this sort of situation like he is or would be if was going ahead.

He has about £15k and about £50k ish equity so would he be looking at about £100k business you think?? That would be possible to loan

 

[adventurelife]

My first thought it sounded to good of price, but that's what's advertised he said. The actual figures are....£295k purchase price with £300k gross profit and net approximate £50k lower. Turnover is around £500k

My mate isn't serious in buying this as he scared to think of going into debt thatbmuch, much I was just wondering what banks are like to loan money in this sort of situation like he is or would be if was going ahead.

He has about £15k and about £50k ish equity so would he be looking at about £100k business you think?? That would be possible to loan

Banks will front 50% if it is genuine with full up to date audited accounts and a snap shot of accounts as of this month. They may from slightly more to someone with good relations with them but not much. Security will be needed in all cases.

£15k and £50k equity is not going to cut it I am afraid. Borrowings on that from a bank in today's climate will be sub £25k. Other finace routes will front more but at higher rates.

Back to the business in question £300k gross with £250k net is very unusual but can be done. Asking £295k for a £250K net business is also very unusual unless he needs a very quick sale and you have to ask why.

If everything stacks up on that business he would have no trouble finding buyers at those numbers. However, see previous post the numbers sound to good to be true and that means 99.95 of time they are wrong.

What is the business sector, what does it do? 50% net profit businesses are always of interest if somewhat like hens teeth

 

[Lee Jones Jnr]

Borrowing £300k is certainly possible, though unlikely for a start up with no experience and such a small deposit.

 

[Frankus]

A VERY rough guide to company value would be to look at the turnover and multiply by 5.

This would value the company at £2.5m. To have it on the market for £295k tells me that it is either the bargainof the century or there is something not quite right, in a 'Sword of Damocles' kind of way.

If the case is the former, get all the details, accounts etc, then get some Venture capitalists involved, but make sure you have NDAs in place first.

If the latter, run away.

Either way, you need to examine it very very carefully.

 

[Lee Jones Jnr]

A VERY rough guide to company value would be to look at the turnover and multiply by 5.

This would value the company at £2.5m. To have it on the market for £295k tells me that it is either the bargainof the century or there is something not quite right, in a 'Sword of Damocles' kind of way.

If the case is the former, get all the details, accounts etc, then get some Venture capitalists involved, but make sure you have NDAs in place first.

If the latter, run away.

Either way, you need to examine it very very carefully.

What nonsense.
There really should be some way of controlling posts containing unqualified advice from clueless posters.

 

[berts]

A VERY rough guide to company value would be to look at the turnover and multiply by 5.

This would value the company at £2.5m. To have it on the market for £295k tells me that it is either the bargainof the century or there is something not quite right, in a 'Sword of Damocles' kind of way.

If the case is the former, get all the details, accounts etc, then get some Venture capitalists involved, but make sure you have NDAs in place first.

If the latter, run away.

Either way, you need to examine it very very carefully.

This is exactly how Not to value a business!

 

[SpeedyExpressCouriers]

A VERY rough guide to company value would be to look at the turnover and multiply by 5.

This would value the company at £2.5m. To have it on the market for £295k tells me that it is either the bargainof the century or there is something not quite right, in a 'Sword of Damocles' kind of way.

If the case is the former, get all the details, accounts etc, then get some Venture capitalists involved, but make sure you have NDAs in place first.

If the latter, run away.

Either way, you need to examine it very very carefully.

Huh? Where did you get this info from?

 

[adventurelife]

A VERY rough guide to company value would be to look at the turnover and multiply by 5.

This would value the company at £2.5m. To have it on the market for £295k tells me that it is either the bargainof the century or there is something not quite right, in a 'Sword of Damocles' kind of way.

If the case is the former, get all the details, accounts etc, then get some Venture capitalists involved, but make sure you have NDAs in place first.

If the latter, run away.

Either way, you need to examine it very very carefully.

Afraid it that was even near correct I would be selling mine tomorrow

There are many ways of valuing a business I have never came across the 5 x turnover way I am afraid.

 

[Vending Siting Services]

Afraid it that was even near correct I would be selling mine tomorrow

There are many ways of valuing a business I have never came across the 5 x turnover way I am afraid.

Yeah, me too. Oh, the Riviera, wonderful house looking over the bay ... the house in question as seen in Dirty Rotten Scoundrels starring Michael Caine and Steve Martin. One day ....

 

[Deleted member 106855]

Can I ask what the business does? Also, why the owner is selling it if you know - I'm thinking perhaps retirement or health issues (I've known a few stories of people finding out they have a terminal disease and want make the most of time left ).

 

[Toby1968]

Can I ask what the business does? Also, why the owner is selling it if you know - I'm thinking perhaps retirement or health issues (I've known a few stories of people finding out they have a terminal disease and want make the most of time left ).

Feck, at 5x turnover I think most people here would sell up and retire, who cares what it does

 

[QuickHomeBuyers]

A VERY rough guide to company value would be to look at the turnover and multiply by 5.

This would value the company at £2.5m. To have it on the market for £295k tells me that it is either the bargainof the century or there is something not quite right, in a 'Sword of Damocles' kind of way.

If the case is the former, get all the details, accounts etc, then get some Venture capitalists involved, but make sure you have NDAs in place first.

If the latter, run away.

Either way, you need to examine it very very carefully.

The max asking price Ive seen ever for a business is 3 times net. Turnover isnt usually a main factor.

Bottom line and future sustainablity and possiblity of growth are the main concerns.

Only if anybody got 5 time turnover.

Q:What would an NDA do in an already running business?

 

[internetspaceships]

A VERY rough guide to company value would be to look at the turnover and multiply by 5.

This would value the company at £2.5m. To have it on the market for £295k tells me that it is either the bargainof the century or there is something not quite right, in a 'Sword of Damocles' kind of way.

If the case is the former, get all the details, accounts etc, then get some Venture capitalists involved, but make sure you have NDAs in place first.

If the latter, run away.

Either way, you need to examine it very very carefully.

Utter crap. Seriously dude where did you learn this from?

 

[Bob]

If Frankus is buying on that multiple, I wish I had something to sell to him

 

[internetspaceships]

I was thinking that - I could retire today on the millions he'd pay me.............

 

Some really stupid comments on here.

Without knowing what the business is ,how on earth can anyone comment on its value.

I have a business that I would not sell for 10 x its turnover because it is pure profit and no work involved.

Its how many hours work you have to put into a business that may well be the true value of a business.

Earl

 

[internetspaceships]

Some really stupid comments on here.

Without knowing what the business is ,how on earth can anyone comment on its value.

I have a business that I would not sell for 10 x its turnover because it is pure profit and no work involved.

Its how many hours work you have to put into a business that may well be the true value of a business.

Earl

For ten times it's turnover? I think you're a lot older than me Earl, and if I got offered ten years income up front, on a plate I'd certainly take that for the business.

Why wouldn't you ?

 

[Podge]

Why wouldn't you ?

no work involved.


That would be a good enough reason for me.

 

[AndyBlue]

A VERY rough guide to company value would be to look at the turnover and multiply by 5.

This would value the company at £2.5m. To have it on the market for £295k tells me that it is either the bargainof the century or there is something not quite right, in a 'Sword of Damocles' kind of way.

If the case is the former, get all the details, accounts etc, then get some Venture capitalists involved, but make sure you have NDAs in place first.

If the latter, run away.

Either way, you need to examine it very very carefully.

Frankus I have a business I am trying to sell as we speak, as you seem to be such a clued up guy to save the negotiation I will give you a special offer. Not 5 x turnover just 3 x turnover ???
Now everybody else, I know the ususal is about 2 - 3 x net but this guy seems really nice so I would like to cut him some slack.
The business by everbody elses measure is valued at circa £50k, using your methodology it is about £350k, so with my discount it is about £220k and as I'm in a good mood can we settle on £200K, I'll even throw in the stock - Deal or No Deal ?

 

[MikeJ]

I think we've established that Frankus's figures were wrong.

Anyone else want to jump on the bandwagon, or shall we get back to answering the OP?

 

[Bob]

...... or shall we get back to answering the OP?

Wasn't that done on page 1 :|