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  • Profile photo of IntrigueIntrigue
    Member
    @intrigue
    Join Date: 2010
    Post Count: 208

    Hello to the brokers and educated persons out there.

    I would very much like to purchase a business but I have no money (sound familiar)

    Anyhow I think I had to rely on the option of vendor finance (if they were willing) however I just wanted to double check that the banks wouldnt be interested in financing me.

    General overview of Situation. Mortgage on PPOR $302k with $20k in offset. Income gross $90k
    Business Includes 20acres, very old home, boarding kennels $920k turn over in a good year gross $250k but hasnt done that for many years for various reasons, but could do again fairly easily. Room for expansion and growth also.

    How easy is it these days to use a business plan to secure finance? would the house and land component of this business secure the overall debt?

    Thoughts and ideas welcomed

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    A business is essentially worthless to a bank. There is no security of any value. What they may lend on is the real property part of it.

    What would the value of the house and land? It would probably be a low LVR too because of the size and the business being located on it.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,018

    Hi Intrigue

    Like Terry i dont want to spoil the party but realistically if you could a 50% lvr on a specialised security such as that you would be doing well. I am assuming that you have no equity left in your PPOR.

    You cash funds in the offset account probably wont go close to even covering your legal costs, stamp duty etc even if they did offer you 100% vendor finance.

    Another consideration is of course how do you refinance the deal once the Vendor Finance loan comes to an end as i am sure it will be for a fairly limited timeframe i.e 2-5 years.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of Pat007Pat007
    Member
    @pat007
    Join Date: 2012
    Post Count: 71

    In Australia a bank will lend up to 50% of the value of existing stock (if purchasing a business)

    Profile photo of IntrigueIntrigue
    Member
    @intrigue
    Join Date: 2010
    Post Count: 208

    Hmm thank you gentlemen, much of what I expected although I must say Richard your comment post vendor finance is one that requires great consideration.. thanks.

    Sadly there is no 'stock' to speak of rather facilities. The last valuation that occured that I am aware of was in 2006 (when the business was running well and the property market was onfire) Val was $900k (although I have no idea how this valuation is calculated I presume 'real' property only but I could be wrong?)

    And yes Richard there wouldnt be much to scrape equity wise out of the PPOR.. perhaps enough to cover stamps but not much more.

    hmmmm..

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