Finance Start-Up – Getting Funding
However much you’d like to conjure a winning business out of the air, it’s important to realize that funding an enterprise requires a lot of effort. As a general rule, you need to put your own money on the line.
Your options are as follows: turn to friends and family, your own savings or to the bank.
If you don’t have sufficient funds personally, family and friends should be your first port of call.
However, when you’re buying a business it is worth considering the bank. In good times it’s been known for banks to lend anything up to 70% of the total price. You will still have to provide the final 30%, or source outside investment.
The bank’s decision
If the bank decides to lend you the money could well be the green light to go ahead. As well as your business plan, the banks will want to see a cash flow forecast for your first year of trading. You also need to have prepared a budget plan, where you show that you’ve done your sums. While a 70:30 lending ratio is the norm, the banks may lend up to 80% for commercial mortgages.
The final offer
If the bank has said yes, you can instruct your agent to put in an offer on the business that you want.
A solicitor needs to see the contract and will negotiate for you. The contract needs to be drafted to reflect everything that the buyer needs, tailored to your requirements. This can be difficult because buyers and sellers have different agendas. The buyer wants to have as much included as possible in the contract so that there is less to sort out. The seller will be trying to give the minimum.
A search must be carried out with the local authority to see whether there are any planning or financial issues that affect the premises. A breakdown of fixtures and fittings in the building needs to be made too.
If there are any existing employees in the business that you don’t want to employ, seek advice on your liabilities regarding redundancy and unfair dismissal.
This all takes time. It takes a minimum of a couple of weeks on average, and that’s if everyone’s working for the same deadline. It can be between two and four weeks.
Then you’ll discover that getting finding’s really not the hardest part.
