Is there any way I can borrow £600,000 !

[nade]

Sorry about the boldness of this question.

I have an opportunity to buy a farm. I have spent some time working out a load of fiugures and know that I can easily convert several old farm buildings into holiday lets, storage and a small equine centre. The total income that the farm + buildnigs would be in the region of £40k per year - this is very much on the conservative sidde of things.

The problem is th big one ie is there any way that I could borrow that much ? Its such a huge amount that I need to get some initial opinion before getting laughed out of the bank.

I have 200k equity in property that I own and am employed

Given all of the ifs and buts around the figures (i know that I would need to provide some strong assurances around these) is there any way at all that I could get that much from somewhere - banks, investors ?

Or should I go back to sleep and keep dreaming !!

 

[thelegalstop]

Well, it is not impossible. You can probably apply for a business loan. I believe there are projects finances by the EC, so why don`t you research them as well. Last, but not least, do not be ashamed to ask in the bank. It is their job to answer your questions. Good luck

 

[Psl]

Try the NFU as a start point, they are always good for advice on all things agricultural.

Try these;
http://www.nfuonline.com/nfudirectory/results/
or
http://www.nfuonline.com/nfudirectory/results/
Good luck.

 

[nade]

Well, it is not impossible. You can probably apply for a business loan. I believe there are projects finances by the EC, so why don`t you research them as well. Last, but not least, do not be ashamed to ask in the bank. It is their job to answer your questions. Good luck

Thanks - at least that gives me the confidence to walk in through the door. My proposal to them would be something much more defined that I could have written on here but at least your comment makes me take that next move.

Cheers

 

[sla3]

The best way to borrow £600,000 is not to need to. Then the banks will be happy to lend it to you. The second best way would be to have liquid assets worth about twice that which they can take as security!

 

[nade]

The best way to borrow £600,000 is not to need to. Then the banks will be happy to lend it to you. The second best way would be to have liquid assets worth about twice that which they can take as security!

By borrowing that much I can create 1,000,000 within 12 months. I suppose that would come too late for the bank ? ie. the porporty would be worth that much (actually about 1.35m if I was more realistic) if i needed to sell. But it is the ongoing business that attracts me. If that went tits up then I could sell and the bank would get their money back

 

[Tom McClelland]

In my opinion (I'm not a bank)

The business proposition, "I need to borrow £600k to generate an income of £40kpa" is a complete non starter. You'll just be shown the door.

The business proposition, "I need to borrow £600k to exit with £1,000,000 within 12 months" sounds more like a viable proposition. But... a very long line of people have got their fingers burned with property development in the last few years. It is very common to both seriously underestimate how much improvements will cost, and seriously overestimate how much value will be added by improvements. In a rising market anything goes. In the current market, not so much.

As a sidenote the best way to make a small fortune is to start with a large fortune and get into the equine business (from my personal experience of the horsey world few would be in it for the money)

 

[JEREMY HAWKE]

Living here in the middle of rural Devon the "horsey people" run larger businesses and their horsey business is almost a hobby . Nobody makes any money from it .
Its a misconception they just look well off and busy ! but thats all. Their money in most cases comes from other places

 

[vvaannmmaann]

Have you got planning permission to convert those buildings and establish a riding school? If not you may need to re-think your approach.
If you have the required planning permission have a look at this http://www.amconline.co.uk/index.aspx
Also be very aware of "claw-back" ie if there is any uplift in the property value then the vendors would be entitled to a percentage of the uplift.
Good luck with it.

 

[nade]

Thanks all. I think the gist of what you are saying is that it might be worth a try with the banks but not to get my hopes up.
Another option is that I go to an investor but my immediate thoughts are that they would want much more than the banks ?

 

[sla3]

Also be very aware of "claw-back" ie if there is any uplift in the property value then the vendors would be entitled to a percentage of the uplift.

Why so?

.

 

[Esk247]

Strangely enough you're doing something my missus was attempting to do a few months ago. We found a farm with buildings on it and planning permission for holiday cottages. 5 acres of land, stable block yadda yadda for 250k or nearest offer. Right on the coast with sea views and all sorts.

Couldn't get the money though, the bank wanted 50% minimum to put down on the total loan amount.

You'll find you need more money up front for commercial loans too, head towards 30% of the total loan amount and more depending on the banks liabilities at the time you ask for the money.

All you can do is ask. Get some feedback from the bank. If they're good then they will give you advice on why any application is turned down and how you can fix it.

 

[GraemeL]

Thanks all. I think the gist of what you are saying is that it might be worth a try with the banks but not to get my hopes up.
Another option is that I go to an investor but my immediate thoughts are that they would want much more than the banks ?

Sorry but......I think you still may be feeling more positive than you should! To get a loan of that amount would require an extremely good business plan, presented most professionally, with detailed financials. It would have to include a lot of convincing evidence why this would be a low risk venture for a bank.

Remember a bank won't loan money on a relatively sound asset like a house unless you have a (say) 15% deposit and you sign over the deeds to them and you have a regular income to repay the loan.

My feeling is that you may only get funding from a VC type of source and to do so you would have to sign over most of the business to them.

If you do intend to have a go with a bank, I would suggest that you have a talk with them first to get an idea of what they would need from you. You could spend (waste) a lot of time working on a plan only to find out - as others have - you will not be entertained without a huge deposit.

G

 

[nade]

Sorry but......I think you still may be feeling more positive than you should! To get a loan of that amount would require an extremely good business plan, presented most professionally, with detailed financials. It would have to include a lot of convincing evidence why this would be a low risk venture for a bank.

Remember a bank won't loan money on a relatively sound asset like a house unless you have a (say) 15% deposit and you sign over the deeds to them and you have a regular income to repay the loan.

My feeling is that you may only get funding from a VC type of source and to do so you would have to sign over most of the business to them.

If you do intend to have a go with a bank, I would suggest that you have a talk with them first to get an idea of what they would need from you. You could spend (waste) a lot of time working on a plan only to find out - as others have - you will not be entertained without a huge deposit.

G

Thanks Graeme,

Having read the last few the last few posts I am certainly not feeling confident.
This morning it looks like I can get hold of £200,000 cash with an investment from my brother. My hope is that this may invite the banks to look at my proposition more seriously. My only concern is that this 200,000 may still not be enough for them to loan me the rest. Views ?

 

[vvaannmmaann]

Why so?

.

http://www.lawontheweb.co.uk/Restrictive_Covenants/Clawback_and_Overage_Agreements

 

[Chris Ashdown]

Have you produced a full business plan for say three years to tell the bank what your expenditure will go on and how you will earn enough to make it pay and pay them back

 

[Searcher]

Check your County Council website for links to business grants which will also include venture capital. There are hundreds and it's a trawl. But I believe there is a lot of assistance for redeveloping agricultural land - you might need to redo the business plan to take into account what the offers are for eg they might support energy projects