The purchase price of the business is only one component. Ensure that you speak to your own financial advisor or accountant, well before you purchase any business! Find out if there are any tax implications or any other costs that will impact on the ‘real purchase price’ of the business.
Once you KNOW what you are up for, you need to consider how to finance your purchase. What is the purpose of the loan? What entity will own the business? Do I need to get finance? Even those with plenty of spare money, may still consider borrowing the money. Your accountant should advise you on this.
Often banks can be your best friend when it comes to lending money for a business. The bank should thoroughly check what you are purchasing, its sustainability and commitments, then YOUR sustainability of paying the money back! Make sure you have all of the right documentation to present to your bank manager to state your case! Some things to prepare include:-
Costs – What are the fixed and variable costs? Are there any staff costs to consider, like superannuation?
Profits – Have you looked at previous financial records? Is the business profitable?
Assets – What assets does the business have? Does it have any intellectual property or leasing arrangements?
Liabilities – Does the business have any outstanding debts? What refunds and warranties still exist for the business? Are there debts owing on assets that you are not aware of?
Tax – What kinds of tax will apply? Consider GST, Capital Gains Tax, and stamp duty implications.
Legal issues – What are the legal agreements on leases?
