Buying a business - how does it work?
15 October 2009, 02:31 PM
#1
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Buying a business - how does it work?
We want to buy a business but not entirely sure how it works.
The business is owned by a limited company and we are buying from the ltd company - it trades under a different name. The ltd company took out a business loan to pay for the business and we are prepared to pay off the loan and for them to walk away from the business.
We have last years accounts but not this years. This years haven't been done yet although they are due now. Without the accounts for this year we can't ask the bank for a business loan but I think we can get the money from elsewhere so the only thing the bank has to get involved with is we pay off the business loan and have the business accounts transfered to us.
Can the business be bought without the accounts being made up?
The business is owned by a limited company and we are buying from the ltd company - it trades under a different name. The ltd company took out a business loan to pay for the business and we are prepared to pay off the loan and for them to walk away from the business.
We have last years accounts but not this years. This years haven't been done yet although they are due now. Without the accounts for this year we can't ask the bank for a business loan but I think we can get the money from elsewhere so the only thing the bank has to get involved with is we pay off the business loan and have the business accounts transfered to us.
Can the business be bought without the accounts being made up?
15 October 2009, 02:36 PM
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15 October 2009, 05:58 PM
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Watch out for premises that are due for a renewal of lease.... a friend of mine got stung by that one. If you are using their existing premises of course....
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dunx
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15 October 2009, 06:05 PM
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Personally I would want to see the latest accounts, along with bank statements, ledgers etc.. to get a proper idea of exactly what the financial situation of the business is at the point you are buying it.
A lot can happen in a short time, so only having the last accounts may not show a true picture of where the business is currently, and therefore what the true value is.
As dunx suggests, check very closely into any lease agreements if you are going to be taking them over as they can be a minefield, also any HP or leased equipment, vehicles etc... as there are various ways these can be put through accounts so they show up as assets on the balance sheet, but aren't necessarily real assets of the business !
A lot can happen in a short time, so only having the last accounts may not show a true picture of where the business is currently, and therefore what the true value is.
As dunx suggests, check very closely into any lease agreements if you are going to be taking them over as they can be a minefield, also any HP or leased equipment, vehicles etc... as there are various ways these can be put through accounts so they show up as assets on the balance sheet, but aren't necessarily real assets of the business !
15 October 2009, 07:03 PM
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Personally I would want to see the latest accounts, along with bank statements, ledgers etc.. to get a proper idea of exactly what the financial situation of the business is at the point you are buying it.
A lot can happen in a short time, so only having the last accounts may not show a true picture of where the business is currently, and therefore what the true value is.
As dunx suggests, check very closely into any lease agreements if you are going to be taking them over as they can be a minefield, also any HP or leased equipment, vehicles etc... as there are various ways these can be put through accounts so they show up as assets on the balance sheet, but aren't necessarily real assets of the business !
A lot can happen in a short time, so only having the last accounts may not show a true picture of where the business is currently, and therefore what the true value is.
As dunx suggests, check very closely into any lease agreements if you are going to be taking them over as they can be a minefield, also any HP or leased equipment, vehicles etc... as there are various ways these can be put through accounts so they show up as assets on the balance sheet, but aren't necessarily real assets of the business !
What exactly are you buying/spending the money on - a going concern, a brand name, a list of supplier/clients. Is it just the goodwill or are there assets
You need a list of all assets and thier current value
All liabilities incl Loans, HP and lease agreements for anything
The premisis - are you taking it on as well, if so for how long or how long is left, is it due to increase in rental costs.
15 October 2009, 10:22 PM
#7
To answer your question directly, of course, you can buy a company without the accounts being made up, but you've got to be really sure about it.
as a general rule I would advise not buying the ltd company as it will come with all its liabilities. Buy the assets of the company - two different things - so buy what you want & leave the rest to the parent co or administrator. Watch out for TUPE related issues if they are more than a handful of employees
Alternatively, go the the incumbent bank explain that you can rebuild the business but that you'll need help and some forgiveness of the debt - or the company will be let go to the wall an dthey'll get shafted unless they have a lot of security and it has net positive assets.
Get all management accounts and do a thorough due diligence
as a general rule I would advise not buying the ltd company as it will come with all its liabilities. Buy the assets of the company - two different things - so buy what you want & leave the rest to the parent co or administrator. Watch out for TUPE related issues if they are more than a handful of employees
Alternatively, go the the incumbent bank explain that you can rebuild the business but that you'll need help and some forgiveness of the debt - or the company will be let go to the wall an dthey'll get shafted unless they have a lot of security and it has net positive assets.
Get all management accounts and do a thorough due diligence
Last edited by Fat Boy; 15 October 2009 at 10:24 PM.
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16 October 2009, 09:47 AM
#8
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Thanks for the replies. We are buying the business from the ltd company.
The business is successful but the couple running it have had a baby and she can't cope with both and they've basically just lost interest. There is only the one employee (my wife) and we have offered to pay off the business loan they took out to buy the business from the previous owner and walk away.
The business is successful but the couple running it have had a baby and she can't cope with both and they've basically just lost interest. There is only the one employee (my wife) and we have offered to pay off the business loan they took out to buy the business from the previous owner and walk away.
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