Business finance...

[Merlin]

Hi all,

I'm currently seriously looking at buying a year-old business. It has a good record, is consistent and the financials look stable.

Thankfully, I have some very experienced and clued-up people in my family who are assisting me with this, but, there is one aspect with which I need to acquaint myself...business loans.

I'll be investing my savings into this, but will fall short of the full amount by about 100k. In addition, as a net to cover the first month's rent and salaries (i.e.: 'just in case' I'm liable for these upfront...), I'd like another 50k in the kitty.

I've been advised to consider the Small Business Development Corp'. This looks to have morphed into SEDA, or what?

Can any of you advise on the best route to go, please? What alternatives do I have?

I have no fixed assets, so my family will be standing as surety for me.

Thank you.

 

[Greg C]

Hi all,

I'm currently seriously looking at buying a year-old business. It has a good record, is consistent and the financials look stable.

Thankfully, I have some very experienced and clued-up people in my family who are assisting me with this, but, there is one aspect with which I need to acquaint myself...business loans.

I'll be investing my savings into this, but will fall short of the full amount by about 100k. In addition, as a net to cover the first month's rent and salaries (i.e.: 'just in case' I'm liable for these upfront...), I'd like another 50k in the kitty.

I've been advised to consider the Small Business Development Corp'. This looks to have morphed into SEDA, or what?

Can any of you advise on the best route to go, please? What alternatives do I have?

I have no fixed assets, so my family will be standing as surety for me.

Thank you.

Hi

Whilst everything you say above is pretty common place is South africa for small to medium enterprise to which I work and do deals etc for you have a couple issues.

Firstly to get a business loan the business must be registered. In a large amount of cases people have successful businesses but they are in their own names ie sole prop business.

Next is the relevent security you have to offer if we go the standard route. If you are buying the business family membersare generally 90% of the time not acceptable to use as surety. Reason? Because whilst they are your family and will stand surety they are not actually running the business and depending on how the share certificates are issued and who the directors are have absolutely no interest in the business. Mostly we want manager run business. Which brings me to the next good/bad thing depending how you look at it. Depending on the amount you are looking for you can go through a development fund through any bank Mine offers one, but there are some very simple rules, manager run.10% securityin some shape or form and CANNOT have any side business must be 100% invested.

Other options leaving banks aside is the DTA department for trade and industry however I am not to certain as to their views on purchasing and financing of existing business as a huge amount of the business is as always is the goodwill aside from the liquid assets and creditors.

Steps? Get your ID,Proof of address. Ensure the registration documents for the business are in order, place whatever liquid cash you have into a savings/investment account. Have financials availa;ble for the business and preferably management accounts.3 months bank statements min, 3 months debtors analysis and a business plan with your projections, strategy and general CV as to why you are able to run this business and use the attached to approach either the banks, or goverment departments for assistance.
Lastly, depending on where you do the loan and where the bank account sits currently for the business and the history of the business with or without a certain institution, will affect your interest rate positively or negatively

Hope this helped

 

[Merlin]

Hi Greg,

Many thanks for the great response. It is greatly appreciated; and has been saved.

I declined the business a week ago, after having sleepless nights for a week about it. The business was great, but I was presented with another opportunity, in a part of the world that I really preferred to be in...

I am hooked on the idea though and will definitely be heading down the self employment route in a few years time.

Kind regards,

Nic