How much can I borrow?

Excellent question!

If you are buying a business then this is a crucial aspect of what size newsagency you can afford. The answer, however is dependant on a number of variables.

The amount will vary considerably between different people even on the same business.

Newsagencies are one of the few types of businesses where it is possible to borrow against the business itself as well as against other assets already owned by the borrower. The percentage that can be borrowed against the leasehold newsagency ranges from about 20% to 60% of business value/purchase price (whichever the lower) - can be up to 70% for freehold newsagencies. To obtain the highest gearing level the business must be within reasonable profit/goodwill ratios, be of a certain size, have a strong lease, be well established with financials available and the borrower needs to be able to demonstrate from their background that they would be successful in operating such a business.

A common area overlooked by new business purchasers is the allowance for all the relevant business purchase costs. These will include stamp duties, legal costs, due diligence costs, initial business insurances, stock valuation, borrowing costs, working capital, rent in advance, rental bonds, supplier bonds, major supplier transfer costs and initial training costs. Many of these are common to ANY business purchase but for a newsagency business, the allowance for these items will average about 15% of the total business purchase price. Therefore, a prudent purchaser would add approx. 15% to the purchase price to cover these. When a specific business has been located, we can then assess a more accurate figure.

Assuming the business and borrower met the required hurdles, then an example of what could be borrowed against the business may be as follows:

 

Purchase price say________________$500,000 (ie. Goodwill, Fixtures and SAV)

 

Allow for purchase costs say 15%____$ 75,000

Total needed to get in_____________$575,000

Maximum loan against the business__$300,000

Amount needed in cash or against other assets say___$275,000

* Of course, it is possible to borrow the full $575,000 if other property security is available (and as long as the business has sufficient income to service the loans.

* To calculate your individual borrowing capacity we would need to speak with you and obtain some information on your current asset and liability position.

Generally we can provide an estimate of your maximum borrowing capacity & business purchase capacity within 5 to 10 minutes.

* This will then allow you to go searching for suitable newsagency businesses up to that limit. When you have narrowed your choice down to a couple, then we can chat again using specific business numbers—quite often we will know about the particular business.

* At that point we can closely estimate the purchase costs and then confirm the borrowing capacity for that specific business. We would then look to provide an indicative loan proposal tailored to your requirements. This would take into account working capital requirements, loan terms (dependant on shop lease), indicative interest rates and costs. Where this also involves restructuring your current borrowings, this would also be included in the indicative proposal.

* Other types of businesses/industries may have a completely different buying capacity so it is wise to determine exactly what the business is before we or any lender/broker can properly assess what can be lent against it.

 

Remember, we have been assisting clients with newsagencies for many years and we would have seen just about every situation that is possible. If it can be done, we will find a way to do it!

 

The easiest way to find out is to either ring us on (02) 6368 7161 or send an email to us at: admin@newsagencyfinance.com.au

 

 

 

 

 

 

 

 

 

 

 

 

    Why not give us a call on: (02) 6360 0622

     or email us at:                                                                                                 

     to discuss how we could help raise the funds your business deserves or    

     any questions / concerns you may have.

NewsagencyFinance.com.au

Finance for your Newsagency Business