Buy a business or start one from scratch?

[GaZ]

Hi all,
Just had a conversation with a mate about wether a bank would rather give a younger person (early 20's) a small bank loan to start up a company or a large one to buy an exsisting company.
Sounds an easy one i know but when you think about it there's a much higher chance of them losing their money on a new business as it's more likely to fail compared to a well established reputable company.

Any comments? Anyone work for a bank who has a knowledge of these things?

Cheers,
GaZ

[Flip]

You'll need a top business plan at any age.

[GaZ]

Yeah I know about all that, I'm not looking to do either (i know i've said that i have in the past!). We were just wondering which way the bank would be more likely towards.

[Flip]

I imagine starting a business would be cheaper then buying one so...

[Mrs Kickstart]

Hi,

The bank not as interested in your failure or success just how much its exposure is. ie 2K or 20K so in general the lower amount.

It will depend a lot on the type business as well. If it depends on the skill of 'you' it can go under pretty quick as oppose to a work force.

It will aslo depend on wether a ltd company is borrowing the money or you are personally underwritting the loan.

Regards
C
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[GaZ]

Yeah but thats my point... It's cheaper but there's more chance of it falling throuh

[Mrs Kickstart]

Yes, but you stand more chance of squezzing 2k out of someone when is all gone tits up than 20K

The sucess or failure will not really be related to the size of loan. Assets will be effective. In real terms goodwill is worth nothing.

Regards
C
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[GaZ]

Cheers fellas!

[Flip]

[DAF]

For either amount, £2k or £20k, it's down to the applicant to put together a business case for why he wants the money and how he plans to repay it. If he can't do that then it's unlikely he'll get even a penny, for either a start up or an acquisition. Aside from considerations such as purpose, repayment proposals, applicant's own stake etc, they will look at the applicant's ability which includes that person's business and financial acumen.

For a notional amount of £20k, I'd be more inclined to give the whole lot to one well thought out business proposition than spread it out £2k each to 10 separate people with no track record and just a "back of a fag packet" proposal.

In answer to your question, therefore, you'll get either amount if your case stacks up; you'll probably get neither if it doesn't.
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[Itchy]

Banks usually don't care , all they want is collateral and lots of it , like my Dad who has lots of collateral can get an easy loan even if his business plan is cack , I had a very detailed business plan once which envisaged worst case scenarios et al , I had very little collateral and the bank said no.


But here is a tip from an okd teacher , only the sellers make money from letting go of a business ,

much in the same vein as , if there was nothing wrong with the business and it made a ton of money why'd they want to sell it? ,

I know somebody who makes 245K a year ,I want to buy his biz he says not for less than 580K (a biz rule I recall once was the value of a biz is usually 2.5 times its turnover)

[DAF]

Itchy said;

[Itchy]