How to finance a company purchase

How to finance a company purchase

The Banks as traditional lenders have become increasingly reluctant to advance money against all but the most solid investment. They have been put under increasing pressure by not only the Regulatory Bodies but also their shareholders. It remains a gloomy picture for finance even though there is slow growth predicted in the coming months.

In this climate it means that anyone looking for finance needs to look more and more beyond those institutions to the various lenders who use the internet as their main marketing tool. There are companies who offer bad credit loans to those whose credit rating may have fallen recently.  While the likelihood is that those who get approval may pay a higher rate of interest that the norm because the risk is perceived as greater, nevertheless the borrowing facility is there.

There are still opportunities even though business has been depressed in recent years. If someone takes the decision not to go back into employment but to branch out on their own, it is possible to do so. That may be a new startup company or the purchasing of an existing one.   In the latter case the value of a business needs to be closely scrutinized to make sure that the purchase price is correct.

One of the main questions is whether the price reflects current conditions or historical success? The whole subject needs thorough research and given it is unlikely that finance will be available from banks, internet lenders are probably the route to take. Their lending will be based on the applicant’s status. If the applicant needs bad credit loans then that is an option.

All internet lenders market their products with full disclosure about the detail from internet rate, maximum allowed, terms and conditions and very importantly the monthly amount to be repaid. In order to get a loan approved an applicant must show how he or she intends to repay the loan. That is essential so someone looking to buy a new business for example needs to demonstrate an existing source of income if that purchase is being funded by bad credit loans.

Therein lies the problem; the ambition is admirable but is it practical? One alternative is to continue in full time employment with regular monthly pay coming in that can pay off any bad credit loans. If the existing business does not require the buyer to actually work there in the initial stages then it is a solution. Of course it will be important in this case to assure the lender that the regular pay will be ongoing.

There are many reasons why a business may be up for sale. In some cases the owner may be retiring, in other cases it may be that it is in difficulty. The important thing to identify is the existing state of the business. If it is struggling can it rebound and prove to be profitable in the future. If there is any doubt a purchase may be a risk too far, especially if its purchase has to be done on borrowed money that has to be repaid.

There is plenty of information on the internet on funding options from bad credit loans to secure loans. There are plenty of advisers who will give a considered view on an existing business and what its prospects are.  It is essential to research both funding, the current market sector in which the business operates and a financial adviser who can provide an insight into both the important financial components of any business and perhaps a qualified forecast of how the economy may go in the next few months and years.

If all this preparation is done and the signs are good, buy.