Would I get a business loan

[Owen1]

If I wanted to purchase an established business for £900,000 and had £200,000 of my own money to put down, and therefore needed to borrow £700,000 could I get a commercial/business loan?

The company has gross profit of £95,000 and net profit before dividends of £75,000.

Any comments would be greatly appreciated.

Regards
Owen

 

[Gordon - Commercial Finance]

could I get a commercial/business loan?

Possibly. More information would be required to know for sure.
What is the business?
Does it have assets?
Is there property?
How has the valuation been arrived at?
What is your experience?
Do you have a business already?

There are many more.

 

[Owen1]

The business consists of business units and a self storage yard and building.

The assets are the business units, the land where it is situated, 75 storage containers, cctv cameras and fences etc.

The value is an issue for discussion, but the figure is what the owner would be willing to sell for.

I have been in business before, had a successful garage which was sold recently, been in the finance industry as well, the running of this new business however is not really intense- it sells itself- i.e. all storage units are rented out.

From your experiences would these figures and business set-up be looked on as favourable by lenders?

Regards
Owen

 

[Gordon - Commercial Finance]

Potentially, as there are assets involved a lender could get involved.

However it would come down to valuation of the assets, which I can’t imagine will be anywhere near £900k unfortunately.

 

[Owen1]

Potentially, as there are assets involved a lender could get involved.

However it would come down to valuation of the assets, which I can’t imagine will be anywhere near £900k unfortunately.

Yes it seems high- I forgot to mention this is what a professional valuer valued it at recently. I’m not sure how exactly he could come to that figure though.

 

[Gordon - Commercial Finance]

Yes it seems high- I forgot to mention this is what a professional valuer valued it at recently. I’m not sure how exactly he could come to that figure though.

Regardless of how professional this valuer was, he probably plucked it out of the sky.

I’m not the person to comment on whether it’s a good deal or not, but what I can say is that lending is potentially achievable, secured on the assets. It will come down to the valuation as I said, which I suspect will come short.

If it continues to develop, give me a shout and I will look at your options.

 

[Owen1]

Regardless of how professional this valuer was, he probably plucked it out of the sky.

I’m not the person to comment on whether it’s a good deal or not, but what I can say is that lending is potentially achievable, secured on the assets. It will come down to the valuation as I said, which I suspect will come short.

If it continues to develop, give me a shout and I will look at your options.

Will do- thank you very much!

Regards
Owen

 

[Mr D]

If I wanted to purchase an established business for £900,000 and had £200,000 of my own money to put down, and therefore needed to borrow £700,000 could I get a commercial/business loan?

The company has gross profit of £95,000 and net profit before dividends of £75,000.

Any comments would be greatly appreciated.

Regards
Owen

Multiple finance options with business, including financing through the business itself!
Paying the seller from the profits of the business.

Ultimately the value of a business is what someone is willing to pay for it. Most small businesses appear to overvalue themselves such that they don't sell. Some do sell but at a fraction of the initial listing price used.

 

[Owen1]

Multiple finance options with business, including financing through the business itself!
Paying the seller from the profits of the business.

Ultimately the value of a business is what someone is willing to pay for it. Most small businesses appear to overvalue themselves such that they don't sell. Some do sell but at a fraction of the initial listing price used.

I guess what I am really after is how much could I borrow with these figures so that I could make a genuine offer for the business. No point making an offer if I can never get the finance in place to go ahead with it.

regards
Owen

 

[Mark T Jones]

I guess what I am really after is how much could I borrow with these figures so that I could make a genuine offer for the business. No point making an offer if I can never get the finance in place to go ahead with it.

regards
Owen

as above. The answer to that will revolve around the valuation of hard assets. There might also be allowance for assured ongoing revenues

valuations come in many forms. Simplistically the vendor is likely to have got it valued on the basis is ‘willing buyer/willing seller. Lenders will build in various levels of distress - as should you.

A recent hotel valuation I saw raged from £16 million up and running to £3.5 million distressed. In that particular case the lender deemed the realistic value to be £11 million and advanced 70% against it.

 

[fisicx]

Are you buying the land or just the lease?

Someone may lend you the money if you can show how you can pay if back. If the cash left each year is less than the interest on the loan then it’s a non-starter.

Pay for your own valuation and then start negotiating.