New business loans

[themuel]

Hey guys,

I am creating this thread just to pick peoples brains really. I am approaching my final year of uni and am beginning to look at what to do afterwards. I have seen a few businesses that have caught my eye for sale and so with that in mind I am doing some research into business loans. Turns out there is a lot to learn though!

Basically my main two questions are:

1 - How do you go about applying/what do you need to get you going?

2 - How much is the standard maximum amount for a start up business loan, and is it effected by whether you are taking on an established business? For instance, I am 26 years old with my own property (Joint owned though so would like to avoid using it as collateral) if I went in with a killer business plan for an established business how much would I be able to borrow?

These are all hypothetical questions, I just like to know my subject before making any official enquiries so I am well prepared!

Thanks in advance clever Efests people.

Sam

[Rufus Gwertigan]

No idea about loans. But when I was signing on a few years ago I signed off as I went self employed. At the time I did not get anything but I complained a bit later as I should have received £50 a week for 16 weeks. I did get that back dated

[eFestivals]

If you've spotted business opportunities that you think are worth buying a business over, why do you feel that you need to actually buy one of those businesses? What's stopping you from going into the same line of business but starting your own company to do it?

If those opportunities are as good as you're thinking then I'd have thought that you are likely to be able to establish a new business for less than you'd pay to buy an existing one.

And of course, if someone is selling a business, then you need to be considering why. Is it really as good an opportunity as you're thinking?

I've no experience of getting a business loan, because I've never needed one. However, I did get a £5k overdraft facility about 18 months back, and had to sign away my son's life in my blood to do so (well, not quite, but nearly) - so I'd be exceedingly surprised if you'd get a loan at this moment in time without any collateral, tho it would depend exactly how much you'd be borrowing.

How much a lender would be prepared to lend you when buying an existing business is (along with any collatoral) likely to be based on the profit that business is currently making than any 'killer' business plan you might present to them. The smart people realise that business plans are meaningless and worthless pieces of shit which should be ignored, they say nothing of substance, they're simply doodles on a bit of paper - and after the banking crisis, for the moment the smart people are back in charge.

[themuel]

If you've spotted business opportunities that you think are worth buying a business over, why do you feel that you need to actually buy one of those businesses? What's stopping you from going into the same line of business but starting your own company to do it?

If those opportunities are as good as you're thinking then I'd have thought that you are likely to be able to establish a new business for less than you'd pay to buy an existing one.

And of course, if someone is selling a business, then you need to be considering why. Is it really as good an opportunity as you're thinking?

I've no experience of getting a business loan, because I've never needed one. However, I did get a £5k overdraft facility about 18 months back, and had to sign away my son's life in my blood to do so (well, not quite, but nearly) - so I'd be exceedingly surprised if you'd get a loan at this moment in time without any collateral, tho it would depend exactly how much you'd be borrowing.

How much a lender would be prepared to lend you when buying an existing business is (along with any collatoral) likely to be based on the profit that business is currently making than any 'killer' business plan you might present to them. The smart people realise that business plans are meaningless and worthless pieces of shit which should be ignored, they say nothing of substance, they're simply doodles on a bit of paper - and after the banking crisis, for the moment the smart people are back in charge.

[eFestivals]

Thanks for the reply....

The reason it is buying an existing business instead of starting one up is because the one I am looking at is a cafe by the sea, which obviously is hard to start from scratch due to lack of buildings/regulations etc. It is also attached to a three bedroom house so its an investment in a lifestyle change I guess.

The reason the owners are selling is because they are retiring so looking to pass it on to new people. Their has been a café there for over 50 years so I guess it must be pretty successful.

My battery is about to run out so cant add anymore but any thoughts are more than welcome!

Ahhh, quite a different business to the types I was thinking of. As long as the current trade is decent then I'd say there's little risk in taking it over, in the short-term at least.

I was thinking along the lines of more normal retail/wholesale/services businesses, where there's always a risk (no matter what the sale agreement says) of you not keeping the customers of that business, and ending up with little of worth. For example, the guy who's always done the printing for efests sold his printing business around 6 years ago, but the new guys were so awful I ended up phoning the old owner and asking him if he'd still do my printing (which he did do, and still does). I suspect the result for the new owner is that he's not got the value out of his purchase that he thought he'd get.

For the longer-term viability, you need to think hard as to whether the current trade level will go up or down - there's a lot of seaside towns that are dying on their arse, tho it might well be the case that they've already hit rock-bottom and the only way is up. I'd have thought that the current financial situation is probably a good thing for seaside businesses as more people are holidaying in Britain right now, tho of course if/when things get better some of the current level of trade might fall away as more people start to go abroad again.

[jk1]

The days of you getting a loan for a Ltd Company just signing a token guarantor form for a small portion of the loan are long gone I am afraid.

You will likely have to guarantee all that you borrow against any assets that you have.

With a sea side cafe, you might want to consider that your business will be very seasonal and you might need a decent amount of working capital on top of the money to buy the business to support yourself during the winter months.

Your first point of call would be to obtain a copy of the accounts for at least the last 3 years. The bank would want to see these before lending you the money. This will also allow you to see the seasonal fluctuations and prepare accordingly. You should also ask an accountant to run over them if there is anything you don't understand. This will also help you guard against any dishonesty in terms of the current owners misrepresenting the true state of the business

[gama]

Wow, God, I too would like to know this stuff, and well, thank you for your answer

Edited July 20, 2011 by gama