Borrowing money to buy a business???
Discussion
I'm considering an opportunity that's come along to buy a 50% share in a business. It has been trading for about 8-9 months and has built up a good credit record. It is clearly a profitable business with great prospects and isn't in the leisure industry. To cut a long story short, the two directors aren't happy working together and one of them is also having some cash flow problems with his other business.
Just for a bit of advice, what are the chances of going to the bank and borrowing to buy this business. How much would I need to stump up of my own cash to show them I'm serious and what else would I need.
thanx
Just for a bit of advice, what are the chances of going to the bank and borrowing to buy this business. How much would I need to stump up of my own cash to show them I'm serious and what else would I need.
thanx
You aren't buying the businessm are you?
You say that you are buying 50% of the business.
Is it a limited company (you mention the word "director").
Are you buying 50% of the shareholding?
What is the director who has problems doing? Is he retiring from the company and selling his shares?
You say that you are buying 50% of the business.
Is it a limited company (you mention the word "director").
Are you buying 50% of the shareholding?
What is the director who has problems doing? Is he retiring from the company and selling his shares?
It all depends on how much you need to borrow. As a rule of thumb at the moment expect to have to put in between 30-50% of what you are expecting to borrow.
Apart from the cash for the shares what are you bringing to the table? Will you be working in the business or just an investor? How will the business cope with the loss of the retiring director/shareholder. Banks will want to know all these things.
There are ways and means of using company assets to help you borrow, but the other shareholder probably wouldn't be keen unless you are really going to add something to the business other than cash.
Apart from the cash for the shares what are you bringing to the table? Will you be working in the business or just an investor? How will the business cope with the loss of the retiring director/shareholder. Banks will want to know all these things.
There are ways and means of using company assets to help you borrow, but the other shareholder probably wouldn't be keen unless you are really going to add something to the business other than cash.
Thanx for the replies.
Just to clear up - The two current directors started the business with a 50/50 investment and no shareholders agreement. This is where the disagreements started with one of the directors not contributing any time to the business. As this developed, more and more problems started arising to the point that the other director (my friend) asked me if I would be interested in a position. For the past 3 months I have been working at the business and now my friend would like me to buy the other directors shares and become a part of the business (pending an agreement on price although he is looking to sell to raise capital for his project).
Just to clear up - The two current directors started the business with a 50/50 investment and no shareholders agreement. This is where the disagreements started with one of the directors not contributing any time to the business. As this developed, more and more problems started arising to the point that the other director (my friend) asked me if I would be interested in a position. For the past 3 months I have been working at the business and now my friend would like me to buy the other directors shares and become a part of the business (pending an agreement on price although he is looking to sell to raise capital for his project).
Edited by ItsTony on Thursday 4th February 18:57
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