Guide to financing the purchase of
a business - Insurances
Any
proposed loan may
well
have to be secured by life assurance on all the borrowers for the
amount and period of the advance. Today the methods used to repay
the loan are wide and varied and include conventional 'capital and
interest' (known as 'repayment mortgage') and a number of interest
only options supported by various alternative means of capital
repayment at the end of the period of borrowing. Each method has
its plus and minus features, but it is of course vitally important
that you obtain genuine impartial independent financial advice to
ensure that the method you choose is the right one for you. We can
make the appropriate introductions in this regard.
The
property you purchase will also need to be insured against loss or
damage by fire and this relates to both the structure itself as
well as the contents (stock, fixtures and fittings, etc.). These
can often be incorporated in one package policy specifically
tailored to suit the trade involved (e.g. a shopkeeper's package,
a hotelier's policy, etc.).
There
are other insurances that are either essential or strongly
recommended and these include motor insurance (which, whilst
outside the involvement of the lending institution, is an absolute
necessity to conform with the law), personal contents insurance
(e.g. possessions such as clothing, furniture, etc.), and pension
contracts (these provide very advantageous tax benefits to you as
well as giving excellent income on retirement). Increasingly there
is a demand for critical illness cover and personal health
insurance (PHI) by both borrowers and lenders.
We
are more than happy to organise
introductions and
quotations for any of these insurance productsthrough
the contacts we have in this sector.
As
far as these insurances are concerned, we are conscious that you
may not be aware, as yet, of the precise levels of cover required
on, for example, stock, but you should at this stage let us have
your best estimates so that we can get comparative quotations to
hand, and then these estimates can be more accurately adjusted
either just prior to or just after take-over of the business. In
addition, you do have the option to change your 'sums insured' at
any time during the course of the trading year.
Whilst
we would emphasize that we act merely as an introducer as far as
life assurance and pension planning are concerned, there are,
nonetheless, issues that need your attention. It is important that
you let us know at the outset whether there are any medical
conditions that are likely to affect the risk and/or choice of
Life Assurance Company. We would also like to know from the outset
whether you are a smoker or a non-smoker, as this can have a
considerable effect on the premiums payable.
Effective
pension planning is essential if
you are to
enjoy a similar standard of living during retirement as you
enjoyed whilst working. We are well placed to introduce you to
expert advice for the self-employed. Pension planning should be
approached as soon as practicable, and whilst it may be useful to
first have
some
experience in your new business to determine your ability to make
a sensible, regular contribution,
delays in starting a scheme can be costly. Previous pension rights
can also be transferred into a new scheme to further enhance
benefits if this is considered appropriate.
Finance Links:
This links below will help you understand the
finance aspect of a purchase of a business.
