Guide to financing the purchase of
a business - Guide
It
is never too early to speak to a Finance Source or Broker during
your search for a business, as you may in fact require guidance on
precisely how much you can borrow with the funding you have
available.
Having
determined both the type of business and the price to suit you,
you may now proceed to contact the various agents covering either
the area or business category of your choice so that they can send
you details of those currently available, together with any that
may come onto the market in the near future. Having found a
business that suits your requirements and having perhaps very
briefly checked back with ourselves as regards funding of it, an
offer for the business can be made and, once the offer has been
accepted, the matter placed in the hands of solicitors.
It
is at this stage that a detailed application form for finance can
be completed with these arrangements running in parallel with the
legal work necessary in securing the property or business. Your
application form should be accompanied by as much supporting
documentation as possible. Agents' sales particulars are useful
together with any accounting information you may have available.
Cash sales forecasts and detailed business plans outlining your
proposals are not essential at this stage but they certainly do
help in putting the case together.
With
a completed application form, we can make a submission on your
behalf to an appropriate finance source with an agreement in
principle usually being given almost immediately. This agreement
in principle (AIP) can sometimes be given even before interview or
valuation. The lender will need to carry out status enquiries, but
increasingly they insist on having your written authority to make
such an enquiry, and usually this authority is given at interview.
In addition, the lender will often require an Independent Business
Appraisal, but this is unlikely to be commissioned until you have
met the lender.
The
valuers themselves are very experienced and totally independent
and will make observations as regards the true current takings and
profitability, the potential available to a prospective purchaser,
as well as obviously making comment as regards the acceptability
of the price. You should note, however, that these valuations are
not always required. Often the lender is prepared to rely on
simply a valuation
for mortgage purposes. Armed with the valuation report or business
appraisal, the finance source will then usually proceed to
informal interview, although, as mentioned above, the interview
can sometimes take place earlier in the procedure. Certainly after
valuation, status enquiries and interview (in whichever order)
formal offer can then be issued.
The
letter of offer will stipulate certain conditions related to the
proposed advance and you must, through both your solicitors, and
ourselves ensure that you are in a position to satisfy those
conditions prior to exchanging contracts.
Once
contracts are exchanged, a completion date is fixed and it is on
or just before this date that the funds are released by the
lending source through your solicitors to enable you to effect the
necessary legal completion.
Finance Links:
This links below will help you understand the
finance aspect of a purchase of a business.
