What Can i borrow?

Getting business finance can be very difficult - times are changing and we have experienced banks tightening up lending in this area even more than before!

As a rule of thumb, banks will lend around 50% of the business purchase price  when only securing against the business - this does not include stock! It is likely you will need to be able to secure the extra amount against equity in a property or other against other cash investments.

Tip  - do not leave your job until finance is unconditionally approved!

We highly recommend you spend the time to get your finances in order prior to bidding for any business to understand your capacities - don't forget to allow yourself some additional room for startup cash flow!

It is also worth noting that business loans, unlike residential, are commonly only for a period of six (6) years.

We highly recommend you engage a Commercial Finance broker - they will help you narrow down your options before applying to any bank only to have your application rejected. Rejected loans affect your credit ratings and future borrowing chances, thus discussion your options before applying is much more ideal. We can assist you through our partnership networks to find the right contact for you. 

Whilst the options of bank lending are usually the first approach, there are other ways to finance your entry into your business, some of which include:

  • Bank & Financial institutions  can be difficult, other smaller niche business lenders are more likely to assist you; however, they are more likely to charge you interest rates that are a little (or a lot higher) than the banks.
  • Family may be able to assist you in guaranteeing a loan or potentially lend directly to you. Ensure there is an established loan structure and formal agreement in place including  the interest rates payable and loan periods. Money can divide family and friends, and the ground rules need to be very clear along with the risks involved. It may be safer to pay a higher rate of interest than loose a relationship later.
  • Business Partner - Consider taking on a business partner help fund the purchase.  
  • Vendor finance (available in some cases) - You may pay the vendor an amount at  the start, then scheduled payments and interest over a set number of months or years. It can also be common where 100% of the goodwill is paid upfront, but the stock is financed by the vendor or placed on consignment.  You cannot use a mix of bank finance and vendor finance.
  • Share sale - consider buying half the business now and half at an agreed later stage.