How to Get a Loan to Purchase a Business – Business Loans Explained
As you most certainly know, purchasing a business doesn’t come cheap!
However, getting the loan is only one of the steps that come with purchasing a business when you don’t have enough funds yourself. There are several other things that you have to take care of before your loan is even approved!
Things to Expect
The mortgage broker that you are going to approach for your loan will require key financial information about the business that you wish to purchase. They have to make sure that, by approving your loan, they don’t put themselves at risk!
In this respect, you may have to provide them with information regarding cash flow, profitability, growth potential, as well as sales forecasts.
Moreover, you will have to invest your own money in the business, as you will need equity. On top of that, since you will need enough money to purchase a business, you may have to provide security for the loan – assets, residential property, share portfolios, etc. This depends on the type of business you are looking to purchase, the risk of industry and the transaction size.
Information You Will Have to Provide
During the first meeting with your mortgage broker, they might ask you for:
1. The business’ current balance sheet.
2. A full tax return regarding the business – less than 2 years old, two years required.
3. Details regarding your qualifications for running a business.
4. Information about your liabilities and personal assets.
5. Details about the deposit or equity that you have to invest in your future business, the good will and value of the business will determine your personal contributions.
6. You may be required to come up with forecasts of expected profit and loss, as well as expected cash flow for the first two years – depending on your personal experience and on the business’ profitability.
7. A business plan.
Key Aspects of Getting a Loan
Plan Accordingly – don’t wait too long before meeting with your broker. They’ll need some time to assess your venture. Do your research and have as much information on the purchase of the business as possible, the vendor or business sales agent will usually provide you with everything you need.
Be Generous with Information – any information that you don’t communicate with your broker in the beginning will have to be given to them later on. Therefore, provide them with as much financial information as possible, as this will help them make a better decision – they’ll calculate the banks risk, as well as yours!
The Right Amount – consider the amount you need to borrow carefully. Once you purchase a business, you will need money to keep it going. Make sure that, via your loan, you have enough capital to help your business survive.
The Bottom Line
Even though the process looks simple, keep in mind that you will have to do a lot of research when applying for a business loan.
The loan amount will be significantly higher when compared to a home, for example – depending on the size of the business. Therefore, you will have to make sure that you don’t put yourself at risk by engaging in this venture.
If you have any questions or need information regarding loans, then you can contact us! Our team is here to provide you with assistance and help you find the best loan for your needs.
Don’t hesitate – reach out and contact us today! We’re more than happy to assist you!
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