EM&F Business Finance, the commercial mortgage arm of Everett Masson & Furby, confirms that following a number of successful completions of business purchases in recent weeks there is a growing appetite among commercial banks to lend for the purchase of retail stores.
This statement may well seem contradictory to the usual mantra that "the banks aren't lending" but they have evidenced that professionally presented proposals are being strongly supported on competitive terms.
Some key areas to unlocking funding include knowing which lenders are keen to lend to which market sector, understanding the criteria each lender has to work within and having great contacts with the business managers for each lender, who themselves are targeted to achieve new lending. There has never been a more compelling reason for using the services of a good commercial finance broker than at present.
Every single lending proposal is different given that each borrower circumstances will never be the same as will the business they are buying. For that reason there is not one lender that can fit all circumstances and EM&F Business Finance report that to meet clients' needs they constantly review the terms offered by around 20 active commercial lenders to ensure the terms negotiated match their client's needs.
They also report that a significant number of their clients are new entrants to the retail sector but have gained lender confidence by working with their broker to produce a robust business plan, addressing not only the positives of their proposal but also taking a realistic view in addressing potential weaknesses.
So is it as simple as it sounds to raise funding?
Not quite as several important factors have a significant bearing on the success of a proposal.
A cash deposit will be required towards the purchase. Typically this will be between 30% & 40% of the purchase price, although other property may be used as additional security in lieu of cash.
The business must be able to evidence that it can support the amount borrowed, not solely based on current bank base rates but on where base rates may rise to in the future. This is referred to as "stress testing" and may affect the amount that can be borrowed.
A good broker will, without charge, discuss all this with a potential purchaser to help identify what their borrowing limits may be and what they can expect to have to repay.
Having identified that the proposal is within lending guidelines a well thought out proposal needs to be put together to support the deal to include a business plan which should include a SWOT analysis (strengths, weaknesses, opportunities and threats)and cash flow forecasts as well as a profile on the borrowers to include not only their business acumen but also their potential drawings needs for the business.
Even with the most robust business plan the borrower still needs to ensure that it is presented to a lender whose criteria it fits and hopefully it lands in front of a suitably motivated business manager.
Pictured above alongside Graham Jones of EM&F Business Finance, are first time business buyers Mr & Mrs Loganathan who sought help to acquire their Freehold Convenience Store and Village PO in High Littleton, Somerset. Graham prepared their business plan with projections as described above and successfully obtained the finance that they required staying in touch with the lenders until the loan was finally drawn down.
The message from EM&F Business Finance is that if you are planning one of the most important purchases of your life, take the time to talk to a good commercial mortgage broker who can make sure you have the best possible chance to succeed.
For more information call the finance office on 01834 849793 or 0845 0942550. Visit our website www.emfinance.net