Financing buying a business. My advice

A new client of mine had asked for some generic advice regarding the financing of buying a business. I thought id post my response here.

Its tricky to be definitive about this and I would say that obtaining finance where you have industry experience is an advantage that is important

The easiest asset to finance is the debtors. If the debtors balance is close to the initial asking price of the business, then you are a reasonable way down the line. That is clearly going to be enterprises that are b2b and also perhaps where the sales terms are more extended

Generally the heavier the equipment, the easier it is to finance but it’s also very specific. You can have the roughly same piece of equipment where one brand will be financed and other not. Not common, but I have experienced this. 

Also the loan to values on equipment are invariably lower than for invoicing, although the reverse may be true with construction

All the assets have to be unencumbered of course

The key to research here is Companies House. This is an area I have advised on

Hope this is helpful

Financial Services post Brexit. The news is good

The extreme opinions on the effects of Brexit have always baffled me. Maybe it’s down to a human desire to overdramatise or maybe the effects of hysterical online media.

I recall being lectured that “every bank” will leave the city with the resultant collapse of the UK economy. More amusingly I was also told that all financial services will relocate to Switzerland. I had to calmly explain that Switzerland is also not in the EU and anyone locating there on the assumption that it was, would be in for a nasty shock

EY have produced this report. I won’t replicate the numbers here because they are succinctly headlined in the link, but suffice to say, confidence in the city is running very high and the loss of jobs to the EU has and is, minimal

Greensill. Perhaps the best summary to date

Even to many of us in the industry, the Greensill collapse can be a little complicated to understand fully so here is a very clear concise and strong summary in the New York Times

This piece doesn’t cover the possible fraudulent aspect of many actual transactions but I believe its certain we will be hearing rather more of that as time progresses

As for David Cameron, the complexity of the whole business perhaps shields him from as much scrutiny as he deserves but either way, he’s was stupid to get involved with these people. Or perhaps just greedy and too lazy to fully understand the business. Even if he couldn’t follow it, surely some quiet external due diligence would have made sense?

Funding Circle. Here we go again

Unfortunate news appears to attach itself to Funding Circle on a fairly regular basis. Whether it be brokers, clients, investors or other lenders, no one would describe them as the most well liked people in town

And here we go again

The buyers of certain loans that Funding Circle wished to offload (controversial in itself) have “accidentally” disclosed personal PG information regarding the business loans to consumer credit agencies. Accident? How do you disclose specific information accidentally one may ask?

FC (appropriate initials)will of course deny that this anything to do with themselves but it would surprise me if this allied to various other issues surrounding their terms and treatment of borrowers, would put them close to the top or even anywhere on a brokers listing