Hey everyone.
I have a financing question for the morgage/finance broker type people that populate these forums.
I am looking at purchasing a business for $240,000 up here in Darwin. I can most likely pull out $120,000 from my PPOR and IPs as an equity redraw, and $50,000 vendor finace. This leaves a short fall of $70,000 to purchase, What are my options? I have found that in general personal loans can be obtained up to $40,000 so I may be able to reduce the short fall even further.
I have no current loans barring my current home loan and IP loans. (eg no current personal loans or credit cards)
The business has shown a good track record and capability to pay back the total of the loan quickly. (within 5 years)
What are my best options for securing the loan capital? I am aware that the interest rate will be a lot higher than regular asset secured loans!
Many thanks,
BorgInvestor.
As well as redraw can you topup the mortgages to 95%? Even with LMI this may be cheaper than business finance.
Does the business have any real estate component? If so a mortgage there will be straightforward.
Lastly speak to a business banker about a loan against the business.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Many lenders have caps on personal loans One way around it is to apply for two personal loans for $35k each. A business loan’s an option but personal loans would probably cost the same but will be easier to get.
Cheers
Stu
well done BorgInvestor
a simpler way of obtaining a loan, is go straight to the bank with projected cashflows, profit and loss, and balance sheets.
all they need is a guarentee that the loan will be repaid, thereby using your assets as collateral.
use their money 100%
simply explained here
http://members.iinet.net.au/~patrick6/kiss20.htmlsounds like your on a winner
a good business with good turnover, far outways sitting around waiting for that $250/wk rent cheque so that you can pay bank $245…to make $5go luck
Thank you all for your replys. I very much appreciate your insight into my situation.
Mortgage Hunter:- with a top up to 95% of all properties I have access to approx $120,000. 120k is an estimated value based on the current value of all IP’s and PPOR combined and multiplied by 95%. I’m under the impression that this can then be capitalised up to 97% including LMI.
The real estate component of the business is listed as valuing 30k and doesnt specify whether building or land is involved. I will have to ask for further information on that one. Even then a loan secured against that appears not to be worth the effort as it’s quite small.
Stuart:- Using the x2 $35K personal loan idea, would it be more likely to be approved if one of the loans is under my name and the second under my wife’s name? As we are both going into the business together, and the loans may be looked apon more favorably?
Hb:- I need to get further clarification from the current business owner as to the assets being sold with the business, as this is a bit vague on the Balance sheets/asset list. Looking on your website it looks like I would be able to loan against 60% of the value of motor vehicles in the business, and 50% from other tangible assets. This increases my options available for finance.
BorgInvestor.
Hi Borginvestor
When we started our business we only had $1,000…no other assets. Money was expensive….but we where hungry.
Within a year, we owned our PPOR, and then, as it become collateral for further loans, money became cheaper and we expanded and expanded the business.The company takes out all the loans.
NOTHING to do with your PPOR.All the bank needs is a guarantee, in case the business goes belly up,
which in our case was a mortgage over your property.good incentive to make the company profitable….and we did….very
thats why the bank needs the cashflow and profit/loss projections
(which will come from the existing business as it’s already running profitable)ALL LOANS for the business belong in the company.
your just the guarantor
once you set the company up….you’ll start to see some great advantages.HI borginvestor
talk to the business division of your bank
you’d be amazed how helpful they are
Im currently with Wizard home loans for all my loans, who dont tend to loan money that isnt secured against a property. I’ve been referred by them to TIO, who apparently are quite good with commercial/business loans.
I’ll let you all know how I go this coming week.
Hello BorgInvestor,
Hb:- I need to get further clarification from the current business owner as to the assets being sold with the business, as this is a bit vague on the Balance sheets/asset list.
Red flag here.Have your accountant and then your solicitor go over everything.
Accountant will be cheaper so start there.
With thumbs up from both your accountant and solicitor only then would I proceed to negotiate the deal.To purchase a business for a good and fair price you must without any doubt know the value of the present business and it’s realistic potential in your hands (your hands not existing owners if they thought it had value they would not be selling right?).
Raising money how long have we got?
Obviously get as much as possible from banks including business and personal.
Then consider other lenders, friends, family almost every one has a well off uncle or should have.
My solicitor has helped me for short-term periods but interest there is pricey.
When you consider that there is more money looking for an investment than investments looking for money, just think where the money is and go there.You can always negotiate with the seller for vendor finance; in this case they are lending you the money to purchase the business.
How keen are they to sell, do they have a date in mind or a project they need the money for?
Do you need to purchase all the company at the same time or are they able / willing to remain as shareholders a while longer?
What if you make the last $50,000 payment in 12 months time and offer them 10%pa interest payed monthly or better still payed at end of loan term.Remember they are selling the business to do something with the return and their return will be better if they can also get a residual income such as rent, profit share, interest etc.
There is a lot more to negotiating a purchase of a business.
How to finance it will be a part of the process.Colin Gowan,
Email [email protected]
Home 02 46531376.
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Mobile 0425201055 (best contact as always working).
For all your CLEANING and GARDENING work“Value is what people are willing to pay for it.”- John Naisbitt
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