What professional credit to take over a business?
4 min read
Buy a business
Buying a business can be done as part of creating a business or taking over an existing business. The professional loan can finance both types of projects. When the company is already existing, it is possible to base oneself on the previous years of activities. The banking institution will thus rely on the balance sheets and income statements. In order to evaluate the value of the company but especially the profitability .One of the most important indicators for banks is gross operating surplus (EBITDA).
Take over an existing business
In France, just under 40,000 businesses change hands each year. One out of three transactions is carried out in hairdressing, bakery, drinking establishment or catering.A real alternative to setting up a business, the purchase of a business allows you to start an activity that has already been launched.
By definition, taking over a goodwill means acquiring all the tangible and intangible elements allowing a commercial activity to be carried out. The buyer therefore acquires the brand, the sign, the trade name, the patents, the fittings or even the equipment.
Several steps must be followed in the context of a takeover of a business. It is first necessary to identify the company to be taken over and to carry out a diagnosis of its activity (its weak points and its strong points). It is also necessary to project in a development of the activity to reassure the lenders on the refunding of their debts.
Financing the launch of a new activity
The launch of an activity involves drawing up a business plan in order to assess the market, the target but also the potential income and expenses related to the launch of the activity. This analysis will make it possible to precisely quantify the need for financing the commercial activity. The banker can thus be reassured about the skills of the entrepreneur but also about the repayment of the professional loan.
A few tips for making the right choice
To maximize your chances of success, there are a few rules to follow. To be sure to concentrate only on the best deals, do not hesitate to be accompanied by a real estate professional specialized in the transaction of goodwill. Thus, you will benefit from the support of experts to help you in setting up the project or to carry out an audit prior to the takeover.
The financial arrangement of your file must also be carried out with a professional. A specialized broker will be able to advise you and direct you to certain expenses that you may not have thought of. He will thus be able to establish a financial forecast that is as realistic as possible.
There are different solutions to carry out this business recovery project . There are essentially two loans intended for buyers: the seller’s loan set up with the transferor of the company directly and the professional loan , a loan obtained from banks. Note that these loans can be combined with public aid (local, regional) but also with a loan of honor .
As you will have understood, several sources of financing are possible in the context of the purchase of a business: Own funds . This is, here, your starting capital and the reserves and undistributed results, those that you bring in the context of the recovery, with your partners. These equity funds can be made up of savings, business start-up assistance, help from relatives, honorary loans or even regional aid.
The seller’s loan is a credit set up as part of a business takeover, whether it is a trade or not. It is the transferor who grants a loan directly to the buyer , the latter will set up a contract providing for the terms of repayment. Generally, this loan is accompanied by equity from the buyer, which represents the major part of the acquisition price of the company. The rest being set up with the seller loan.
In practice, it is often a loan granted with a known buyer , either a family member or employees wishing to take over the company from their employer.
The BPI France transmission development contract . It is a solution that makes it possible to finance the purchase of goodwill and acquisition costs. This contract can only represent a maximum of 40% of the loans put in place.
the bank loan . The professional loan is a credit that the purchaser will seek from the banks, this solution is the most common. This loan cannot extend over a period of more than 7 years . Banking establishments will require a certain number of guarantees on the goods financed. They require a contribution from the purchaser in equity and a guarantee , either in the form of a pledge or counter-guarantee from a surety organization
It is often advisable to dwell on the rates but not only, it is also necessary study the application fees, the terms of guarantees required by the banks, and the operating conditions of the account. Being accompanied by a professional broker is highly recommended.Also called “leasing”, this form of credit is also possible to finance certain equipment. Whether in the context of a takeover or the launch of an activity, the upstream preparation work makes it possible to define the envelope that will be necessary to finance the professional loan. It is therefore necessary to list all tangible and intangible assets. Then file a credit application with a financing professional. You should know that the duration of a professional loan cannot exceed 7 years. It is therefore necessary that the monthly payment can be covered by the activity of the company from the first months, taking into account the seasonal periods if there are any.
