Staff buyout / takeover financing

[Brennerz]

Myself and 2 other employees have been informed that our employer (after falling ill) isn't interested in the business any more. There is a possibility we could take the business over. He is self employed not limited a company.

We haven't outlined any agreements yet, e.g. if he will gift the business or we have to pay it or take on debt etc.

Because the business has run down a fair amount, we will need to purchase more stock etc We would intend to set up a limited company but our main concerns is finance, in this situation what would be the likeness of getting loan for working capital / stock - I know it may not be easy. I think the concern with a loan is that usually even for a limited company a bank would want some personal guarantee? Are there any lenders that will lend to a limited company without personal guarantee?

Does any one have any suggestions for this situation?

Kind Regards

 

[oz07]

I heard recently that certain Peer 2 Peer platforms are good for this. Happy to loan to ltd companies and without personal guarantee. This is as much as I know though. Would be worth some research your end. Something tells me all the big institutions would want personal guarantees as you suggest.

 

[Brennerz]

Thanks oz, didn't think of peer to peer - do you have any experience with or perhaps some suggestions of platforms.

 

[oz07]

No experience sorry. Apart from a free £30 from Zopa about 10 years ago for lending it out. Just get on google start going through them...

 

[@aiteoconsulting]

We have a funding page on our website - you can search funding for business expansion, working capital etc. from a platform of lenders (think comparethemarket for business loans). You might find some options through here:

https://aiteoconsulting.co.uk/funding/

 

[Mark T Jones]

The short answer to your question is that no lender wil lend to a start up without PGs.

The obvious question is why wouldn’t you be prepared to guarantee the deal

Every time a flakey lending proposition comes up someone mentions crowd funding or P2P (and someone will pos5 a link to Funding Circle.). This really isn’t what crowd funding is about.

 

[Clinton]

@Mark T Jones is spot on, of course. Even stating that you are uncomfortable giving PGs suggests you lack confidence in the future of the business. You need to put your backside on the line. If you lot are not prepared to do that you are not ready to own this business!

There are other financing possibilities. An MBI, for example. But if you want proper advice on these options and how you could possibly finance the deal, you need the expertise of a properly clued up corporate finance firm. Them lot don't come cheap and they won't muck around with contingency based payments i.e. where you pay them when/if a deal is done. No, sir, they'll want their money upfront.

Every time a flakey lending proposition comes up someone mentions crowd funding or P2P (and someone will pos5 a link to Funding Circle.). This really isn’t what crowd funding is about.

Hear, hear!

 

[Brennerz]

I fully understand what you are saying. The company has been trading for around 6 years, but I guess with the guy being self employed and us taking over it may well be considered a start up.

Of course, why would anyone lend money without a guarantee (I wouldn't want to) and yes I should be confident in the success of the business and want to offer a guarantee. But lets be realistic, wouldn't we all want to look for the best deal that effects us less personally. I've not once said that I won't offer a guarantee, but wouldn't the sensible option be to research all options to get the best possible deal?

 

[Mark T Jones]

I fully understand what you are saying. The company has been trading for around 6 years, but I guess with the guy being self employed and us taking over it may well be considered a start up.

Of course, why would anyone lend money without a guarantee (I wouldn't want to) and yes I should be confident in the success of the business and want to offer a guarantee. But lets be realistic, wouldn't we all want to look for the best deal that effects us less personally. I've not once said that I won't offer a guarantee, but wouldn't the sensible option be to research all options to get the best possible deal?

The challenging part is differentiating between seeking the right deal and having unreasonable expectations. If a start up comes to me wanting funding without PGs (and they do), we have a very brief conversation because no professional will give time to someone who expects too much

As an aside you might find that start up loans are right for your needs.

 

[Brennerz]

I get what you are saying and I realise a guarantee is the only option - was worth asking the question.

For this kind of situation - taking over a company - what advise, if any would you give. As mentioned before there's a lot to discuss, regarding stock, goodwill, debt etc. It might be a case that we could just buy the remaining stock etc.

Is there anything specific you would look at for or be wary of? In terms of seeking finance, obviously hard for you to say without me being able to say what the agreement is, would you say its better to treat it as being the company or a start up? Is there such a thing as 'buying a company' if the person is a sole trader?

I've had a couple of businesses before, but I want to avoid the 'I know it all attitude' hence the questions that may have obvious answers.

 

[Clinton]

But lets be realistic, wouldn't we all want to look for the best deal that effects us less personally. I've not once said that I won't offer a guarantee...

Your OP gave the impression that the option of a PG was simply not on the table.

Is there such a thing as 'buying a company' if the person is a sole trader?

No, there isn't. You can't buy the business, you can only buy the assets of the business. I've explained the difference between share and asset purchase here.