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A Fin24 user who has the opportunity to take over a mines supplier seeks advice. He writes:
I am currently a general manager of a steel fabrication company supplying the mines. The owners have decided to sell the company. I am exposed to an opportunity to buy them out and take over the company as a going concern.
The problem however is that the funders (the Industrial Development Corporation, the Small Enterprise Finance Agency and others) want the deposit or security for the loan, which I do not have.
How can we set it up so that the owners get their money and I continue with the business? I don't know if the lawyer can help with some agreement, or what could be the way forward.
They are willing to negotiate, as long as they get their money in the end.
Independent business consultant Anton Ressel responds:
You have an interesting opportunity. My first question would be: why are the current owners selling the business?
Do you have audited financials showing that the business is a good investment, and more importantly, what are the projections going forward? We all know that mining is a sector under pressure.
What impact will it have on the business if the industry stalls?
If we can assume that you have done your due diligence and are indeed looking at purchasing a viable concern, the question of how to secure the funding becomes key.
As you have no surety or capital available for a deposit, your options are limited to getting the funder/s to waive the need for a deposit, or finding a partner who can bring either of those elements to the table.
Is there anyone you trust (family, friend, colleague) who may be prepared to either loan you the money for the deposit, or stand as surety for the loan in exchange for a percentage stake in the business?
Whatever the final strategy, you will indeed need a legal professional to draw up any partnership agreements and structure things correctly to protect all parties in the event of problems (or successes) down the line.
- Fin24
* Share your experience of setting up a business or simply ask a question. Our business panel can put you on the right path.
I am currently a general manager of a steel fabrication company supplying the mines. The owners have decided to sell the company. I am exposed to an opportunity to buy them out and take over the company as a going concern.
The problem however is that the funders (the Industrial Development Corporation, the Small Enterprise Finance Agency and others) want the deposit or security for the loan, which I do not have.
How can we set it up so that the owners get their money and I continue with the business? I don't know if the lawyer can help with some agreement, or what could be the way forward.
They are willing to negotiate, as long as they get their money in the end.
Independent business consultant Anton Ressel responds:
You have an interesting opportunity. My first question would be: why are the current owners selling the business?
Do you have audited financials showing that the business is a good investment, and more importantly, what are the projections going forward? We all know that mining is a sector under pressure.
What impact will it have on the business if the industry stalls?
If we can assume that you have done your due diligence and are indeed looking at purchasing a viable concern, the question of how to secure the funding becomes key.
As you have no surety or capital available for a deposit, your options are limited to getting the funder/s to waive the need for a deposit, or finding a partner who can bring either of those elements to the table.
Is there anyone you trust (family, friend, colleague) who may be prepared to either loan you the money for the deposit, or stand as surety for the loan in exchange for a percentage stake in the business?
Whatever the final strategy, you will indeed need a legal professional to draw up any partnership agreements and structure things correctly to protect all parties in the event of problems (or successes) down the line.
- Fin24
* Share your experience of setting up a business or simply ask a question. Our business panel can put you on the right path.
