Commercial Finance Requirements for Buying a Business

by Alex Stajka 4th of December, 2023
Commercial Finance Requirements for Buying a Business
Commercial Finance Requirements for Buying a Business

Buying a business for sale in Perth often relies on securing commercial finance and typically involves a series of steps and requirements. SOT business brokers have noted some key factors to consider when applying for finance for the purchase of a business, that may assist in getting the finance application approved.

1. Business Plan

Prepare a comprehensive business plan that outlines your goals, strategies, financial projections, and how you plan to operate and grow the business for sale in Perth.

2. Financial Statements

Gather financial statements for the business you're buying and your personal financial records. These statements may include balance sheets, income statements, cash flow statements, and tax returns. SOT’s Perth business brokers will assist any buyer in gathering the financial documents of any business they buy.

3. Due Diligence

Conduct thorough due diligence on the business you intend to purchase. This involves reviewing its financial records, contracts, leases, customer base, assets, liabilities, and any legal or operational issues that may impact its value. SOT business brokers provide all the information that the buyer reasonably requests.

 4. Valuation

Determine the value of the business through an appraisal or valuation process. This assessment helps lenders understand the worth of the business and its ability to generate future cash flows. SOT business brokers list businesses based on a rigorous in-house appraisal process to ensure the price reflects market trends.

5. Deposit

Prepare a significant deposit for the purchase, typically ranging from 10% to 30% of the total purchase price. The specific amount may depend on the lender's requirements, the industry, and your financial profile.

 6. Personal Creditworthiness

Maintain a good personal credit history. Lenders often assess your credit score, credit report, and debt-to-income ratio to evaluate your ability to manage debt.

7. Business Collateral

Identify any collateral that can be used to secure the loan. This could include assets such as real estate, equipment, inventory, or accounts receivable. Having tangible collateral increases your chances of securing financing. SOT business brokers will often provide a detailed list of plant and equipment with associated values. This will assist the bank in its decision to approve or decline finance.

8. Industry Experience

Demonstrate relevant industry experience and expertise to assure lenders that you have the knowledge and skills necessary to successfully operate the business. This is not critical but will again assist the bank in determining their appetite to provide you with a loan.

9. Cash Flow Analysis

Prepare a cash flow analysis that shows the business's ability to generate sufficient cash to cover its operating expenses and debt obligations and provide a return on investment.

10. Legal and Professional Assistance

Seek the guidance of professionals such as finance brokers, lawyers, accountants, and SOT business brokers who specialise in business acquisitions. They can help navigate the legal, financial, and operational aspects of the purchase and assist in securing financing.

Remember that each lender will have specific requirements and criteria, so it is important to secure the services of an experienced and knowledgeable finance broker who can place your application with a financial institution that suits your requirements. Need further help? Talk to our qualified team when buying a Perth business for sale to ensure the process is made simple.


SOT, Perth business brokers that care

Looking to buy a business for sale in Perth? SOT Business Brokers Perth are familiar with every aspect of the Perth business sales market.

SOT can also aid in business growth. SOT can better position your business for success thanks to its extensive network and in-depth knowledge of the Perth business market.

Tags: buying finance small business

About the author

Alex Stajka

Alex brings a wealth of knowledge in business brokering and commercial finance having worked for the biggest brokerage in the world as well as a Perth ...

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