Business acquisition financing - Loans for the purchase of a business

When you buy and take over a business, you usually know (if you've done your homework) that it's a company with a proven track record. However, there are things to consider before you press your foot on the accelerator and get down to business. You may not be able to come in like a whirlwind and change the name, logo and make other big changes just from that. Or maybe that's just what you need to take the next step?

5 tips for buying a business

1. Find a company that suits you.
   Make sure the company matches your vision and search profile. This is something you invest your life in. Do it right!
2. Appreciate the company.
   The seller often makes a higher estimate than the buyer. Behind the emotion-provoking decision may lie many years of history, blood, sweat and tears when you decide to sell your child - your business. So ask an independent party, such as an accountant, to carry out the valuation. With the help of market valuation, you can see what the market is willing to pay for a similar company. Compare company size, industry, location, etc.
3. Also calculate how expensive it would be to start over. Then you can compare the two things and see if it's a deal worth making. There are usually three types of valuation methods:
   - Valuation of assets
   - Yield valuation
   - Market valuation
4. Negotiations.
   It's not like you go to the store and buy a sweater at a fixed price. There is also no market in Spain where you and the seller haggle with each other. The negotiation may concern whether certain parts should be included in the deal, the date of disposal of the business or the like.
5. Be prepared for the fact that finding the right one can take time.
   Get in touch with the owner, and maybe even former employees or people who have been in some way involved in the operation of the company. This allows you to learn secrets, strategies, relationships and other valuable things before you take control yourself.

Advantages of buying a business

As with many things, there are pros and cons. The same applies to buying and taking over an already operating company. But we don't just say it — we'll give you tips along the way!

You get warm and established customers. Growing organically and from scratch is time consuming and not always successful. When you have an existing and active business, you probably know what it's been like lately.

A proven business that is likely to be financially sound.

It is easier to find the right kind of financing, since a bank or lender has more experience than a start-up company.

Disadvantages of buying a business

You take possession of both positive and negative qualities and history. Analyze and see if the positive sides outweigh the negative sides or if the negative sides can be easily corrected.
It is easy to underestimate the importance of the previous owner to the company. Relationships can be personal and hard to shift. Everything from reduced prices agreed with suppliers to sales to customers may have depended on personal contacts with the previous owner. Now your profitability depends on this crucial point.
If your business is poorly run, getting your finances in shape can take a lot of time and money. But maybe it's worth it, because the price tag is likely to be lower?
Maybe the future of the company is not as bright as the past? Depending on the products or services offered, it can be seasonal or even trend-based. A company like a construction company, a taxi company or the like is not as sensitive as an online store selling fidget spinners...

Business Transfers

Buying and taking over a business can be a great way to start as an entrepreneur - or tie up your fifth business.

Whether it's “launching” your first trip as an entrepreneur, starting a chain, or just broadening your horizons as an entrepreneur, it's good to know a few things about business transfers.

The application is usually based on you as an individual and possible previous attempts.
Banks and lenders don't want to do a credit check on the business you're buying. That's because you don't own it right now, and a lot can happen along the way. Taking out a loan for the purchase price is therefore unusual unless it is possible to borrow from another company that you already own, or from you as an individual.

Qred can help you with business transfer

In the case of Qred, we always look at your current business, when you are buying a new business, in the overall assessment of your personal finances. So it doesn't matter how good a new company may look when you apply for it with another company.

Read on and apply for a business loan to see what we can offer you in your unique situation. We have no lock-in period or early repayment charges, so you can take out a loan to take over a business and pay it back whenever you want.

Can I buy a business with a business loan?

Oh, absolutely. Some banks, lenders and government agencies such as Bank or Qred can help with this. We at Qred prefer that you have taken over the business before applying for a loan to the company. We are happy to help businesses new and old, small and large to get a loan for their business operations, but you need to have a working company to apply for and get a loan.

Suppose you have a company today - company A. You now want to buy and take over company B. That's when we evaluate company A and issue a loan that allows company A to buy company B.

Different Forms of Business Transfers

Business transfers are usually made in limited liability companies. Sole entrepreneurs are not legal entities, so only assets can be transferred.

The different forms of acquisitions or transfers include:

Acquisition of all shares of the company.

Acquisition of part of the company's shares

Acquisition of business/company (transfer of assets)

Buying and selling businesses

There is a lot to consider when selling or buying a business.

How a company is valued in sales
There are usually two different ways to value a business in a sales situation.

Substantive valuation refers to the calculation of the difference between the assets and liabilities of an enterprise. This is a simple method that is used, for example, in real estate companies.

In return valuation, on the other hand, a model is used in which the price of a company is calculated in proportion to the profit (return) generated by its buyer. This method can be used for most types of companies.

Purchase of parts of a limited liability company

Another common method is to buy parts of the company's shares. This is often done when a company has growth plans.

Actual form of business transfer

Often the term disposal is used when it involves the sale or purchase of a business of some kind, but the actual form is when a limited liability company buys another limited company. In this case, you really just have to determine whether you want to keep the legal entity you bought from or not.

If you want to retain a legal entity, it is often very simple at first. All administration goes normally, but over time it can lead to unnecessary work. Double annual reports, different organization numbers, employees, etc. It can also make it harder to get financing as if it were all in one and the same company.

Therefore, it is usually easier to merge a new company into an existing one to avoid additional work later.

Acquisition of property

Another common method is the acquisition of property. In this case, not a legal entity is purchased, but only all assets. This can be simple if it is a restaurant. It is then that the premises, equipment and other goods are evaluated in order to agree on a price.

However, if you have more fragmented values, such as customer contracts, it can be more abstract and harder to value.

Many people therefore seek help from law firms that are accustomed and have expertise in corporate transfers. Learn more and book a consultation with our Lexly partner to resolve your business transfer.

In the contract

These elements are usually included in the business transfer process.

Letter of Intent (LOI)

A business transaction usually begins with the seller and the buyer drawing up a letter of intent. This is called a letter of intent (“Letter of Intent”, LOI), in which different parties express their intention to execute a business transfer.

This is usually regulated by:

Duration of negotiations
exclusive right to negotiate during negotiations
Negotiation results achieved, such as the amount of the purchase price.
Order of negotiations for further negotiations
What information must be provided to prospective buyers during the examination of the company (also known as “due diligence”).
Confidentiality
How Confidential Information May Be Used
Obligation to return all submitted documents or data.
Prohibition/rules according to which employees of the company to be purchased must not be offered work for the buyer or contact with customers and suppliers.
These often involve some form of punishment for possible violations.

Our partners are business transfer experts
We've already mentioned Lexly, and we have other partners who can help you move your business, whether you're buying or selling a business.

Good luck with your business!