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Hi Plummer,
Given that the business you are purchasing into is an existing entity it would be likely that you are able to use its existing net cash-flows to service a possible loan. Note, however, that you are also bringing potential contingent liabilities to the table that may impact upon your serviceability (borrowing capacity) dependent on the legal structure of that buy-in and its existing debt portfolio.
It is also worth noting, when calculating the ability of the existing cash flow to service new debt, one needs to reflect upon the historical stability of that cash flow (in other words, it has been on a steady and tight upwards trend over the past few years). If it is not stable, any potential lender will attribute a degree of impairment (or hurdle) to their calculations of serviceability.
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Hope this helps.
Kind regards,
Andrew
andrewnell | Naritas Finance
https://www.naritas.com.au
Email Me | Phone Me
