How to finance a business? – Business loan

 

When taking over a business , the buyer invests a portion of his savings in order to build his personal contribution but it must often be supplemented by external financing such as a professional credit.

Commercial property?

Commercial property ?

A goodwill is a set of movable (and not immovable) goods that a trader organizes in order to seduce and acquire a clientele: this can be broken down into material, stock, right to lease for a local. The business consists of two separate entities, tangible property and intangibles:

Intangible property

They are composed in various categories, here is a non-exhaustive list:

  • The clientele: surely the most important component of the business.
  • The right to lease: it is related to the commercial property and therefore to the renewal of the lease. If a landlord does not renew his lease then he has to pay compensation.
  • The commercial name is the name given to the business and it is he who will individualize the company.
  • The commercial sign: the sign and the trade name are very often compared because the two names stipulate the identity of the company.
  • Licenses and administrative authorizations: some establishments and businesses need a license (the famous IV license for bars for example)
  • Commercial property rights: these are patents.
  • Industrial property rights
  • Intellectual and artistic property rights where applicable
  • The official awards and medals obtained in the exercise of the activity.

The advantages and disadvantages of taking over a business

The advantages and disadvantages of taking over a business

For the person who buys a business (this is called the assignee)

The major advantage is that the buyer becomes the owner of the assets of the company, including the clientele. It can be considered that it ensures a minimum turnover considering the work done by the predecessor.

The disadvantage is that the amount to be financed in the event of a resumption of business is often high and this may lead to an increase in so-called transfer duties.

For the person selling (the transferor)

By disposing of his assets, this definitely clears him of his business even if he has to settle the liabilities and the taxes. He no longer has any significant obligation to the buyer. It has no guarantee of liability to provide.

The disadvantage is that the price of the business can not be paid to the seller as the oppositions exist. This price is then sequestered with a receiver dispatcher for 4 months to purge any debts.

The tax cost is higher for the seller because the sale results in the recognition of significant capital gains that can significantly reduce the selling price: taxation of significant capital gain + additional taxation if the company must be liquidated.

Guarantees

Guarantees

When buying (or selling) a business, various guarantees are committed on both sides. The obligations are as follows:

  • the obligation of delivery (the seller must make the business available to the buyer),
  • the guarantee of eviction where the purchaser must be guaranteed of any act of vendor that might oust him from enjoying the acquired property,
  • the guarantee of hidden defects,
  • compliance with mandatory information such as the indication of the origin and ownership of the business, the statement of turnover and profits made during the last 3 years and the statement of the lease.

Financing a business

Financing a business

There are several ways to finance such an operation:

  • Thus, one finds the personal contribution (own funds) which must be higher 30% of the sale price of the company / trade,
  • There are also the loans of honor which are a loan at zero rate to access other bank loans afterwards,
  • the private call to the savings (concept of “Love Money” with the family, friends, colleagues, acquaintances),
  • The professional loan makes it possible to finance the acquisition of goodwill over 7 years,
  • The equipment, for example when renovating the fund, can be financed by leasing, otherwise known as Leasing,
  • The stock is not financeable with a bank, which is why it is important to have an important personal contribution,
  • Another option is to use the equity loan, which helps strengthen the equity of the company.

Accredited bodies guarantee a loan to finance the business as financing (loan without guarantee or personal guarantee of 40000 to 400000 USD which systematically accompanies a bank loan for a minimum of 5 years), the loan ECP (loan without guarantee or personal guarantee from 2000 to 7000 USD for a period of 5 years) and finally private equity which is a capital investment in companies (often listed on the stock market)

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