Are you looking to purchase a newsagency and require finance, at Professional Finance Brokers we can assist you structure a specific Newsagency Finance Package tailored to reflect your own individual circumstances. From assisting you with an indication on what price newsagency you may be able to afford, to choosing the right lender or just ensuring your loans are correctly structured a Professional Finance Broker can assist you with all your newsagency finance requirements.
With many years newsagency industry experience and as the preferred financier for the industry body the Queensland Newsagents Federation, our business has helped hundreds of customers with their dreams of owning and purchasing a newsagency business. So if you are looking to purchase a newsagency and don't know where to start your Professional Finance Broker business specialist would welcome the opportunity to meet with you to review your newsagency finance requirements and provide our professional advice in structuring a tailored financial package to meet your current and future business financial needs.
For friendly help and guidance with your newsagency finance requirement please call us on (07) 3349 9044 or just click contact us now.
How Much Can you borrow to buy a newsagency?
There are no specific guidelines in relation to the financing for the purchase of a newsagency business, nor is there any one financier who specialises in the financing of these businesses. Whilst some major banks have newsagency policies which outline specific industry lending parameters it does not necessarily indicate that this bank will lend in every situation.Most banks newsagency policies do vary according to the location, price of the business, your background experience and many other variables. The maximum you can normally borrow against a newsagency business is 50% of the total purchase price subject to the lenders own criteria which can differ between banks to include or exclude stock. In certain circumstances some banks will provide higher loan to value ratios (LVR) against newsagency businesses of up to 60% on a case by case basis however this is normally subject to higher financial benchmarks being applicable and often you will pay a premium in costs and rates for this privilege.
The total amount you can borrow will also depend on the amount of future maintainable income generated by the business you are purchasing and your ability to meet all your commitments including loan repayments, living costs and tax from this income.
When determining how much you can borrow you also need to allow between 10% and 15% of the total purchase price to meet all associated start up costs which include government stamp duty, legal fees, accountant fees, bank fees and other regulatory and licensing costs.
When considering your borrowing requirements you will also need to establish how much cash you have to invest, what personal assets and securities you are willing to provide, fixed and variable rates and more importantly understand your comfort level when using debt financing. Your attitude to debt has a major impact on what level of finance is appropriate for your business. Some people are more at ease with debt, and are willing to take a calculated risk to grow their business. For example if you can borrow funds at 8% and invest in your business to obtain a 20% return you are effectively increasing your wealth. However if debt is going to cause you to not sleep at night it may not be worth it. You need to be comfortable with your debt levels to make it work well for your business.
The process of loan structuring begins after you have identified your financing requirements. Ensuring your loans are structured correctly will provide you with the freedom to operate your business within acceptable agreed credit risk boundaries. The first step in the structuring process is to determine the right borrowing entity and an early visit to your accountant and lawyer can assist here. Most accountants and lawyers will provide a structure depending on your own individual circumstances after considering tax implications, asset protection and exit strategies.Once your borrowing entity has been determined it is important to establish the correct loan structure to mitigate any specific credit risks. Loan structuring is one way lenders differentiate their credit facilities from those of their competitors. When purchasing a newsagency some common financing issues which will impact on your loan structure are as follows;
- Loan Terms - Normally reflect what security is provided however if business security is provided, normally the loan term will need to align with the lease terms
- What is the lenders maximum LVR against newsagency businesses?
- Is a Right of Entry or Mortgage over Lease available?
- Is a business valuation or due diligence required?
- Are Bank Guarantees required for rental and publisher bonds?
- What are your working capital requirements?
- Is 100% debt funding required?
- Repayment amounts and frequency.
- What ongoing financial covenants will be applicable and can they be met
Ensuring your loan is correctly structured is not only important in mitigating the lenders credit risk it is important to ensure you have the flexibility in your finance arrangements to allow your business to be successful now and in the future.
Dealing with an industry specialist can help save you time and money and if you use your own bank you should ensure you are speaking with a bank manager who has newsagency industry experience. This is quite important as without the necessary industry experience they may not be able to provide you with the correct advice and loan structure. Asking them how many newsagencies they have funded and what they know about the industry can assist you in determining if they have the capacity to help you. Also some industry experts in banks have just been promoted into their position and have no real industry background other than their understanding of their own banks policy.It may also be preferable at this time to seek the services of a specialist newsagency finance broker who can add value as they can provide you with options regarding lender selection and help you through understanding the newsagency purchase and finance process. The same selection criteria applies when choosing a finance broker and you should ensure you are dealing with a broker who specialises within the industry and not a broker who has no industry experience.
The best bank is the one that will provide you with the right interest rate, products and terms you want. Your Professional Finance Broker has an intimate knowledge of the banks and their policies and will normally only recommend lenders that they believe will meet your specific circumstances. Many newsagency purchases are not straight forward and your Professional Finance Broker can also add value by identifying any financing issues upfront that may arise during the purchasing process and provide you with the right advice when selecting a lender. For example, if your banks policy dictates that a Right of Entry and Mortgage over a Lease are required and these are not available, then you may need to consider a lender that does not have these requirements. Furthermore when the banks know you are dealing with a finance broker they understand that they will need to provide their best deal upfront to win your business. If you have been an existing long term bank client you may not necessary get the best deal possible with your bank as experience tells us that when faced with limited competition your own bank may not provide the best deal and unless you have done your own market research you may not know any better.