business purchase.

[beetills]

Being unemployed/able now for over 18 months and the time has come to take action.
Unlikely to get hired by any one as i am at an age where people don;t want you and i have very few skills(APART FROM HONESTY AND RELIABILITY) having spent my years working for Govt Departments and S.O.Es. However i am in a position where i can by a job thru buying an existing business.
What i want to know is if it's better to mortgage your house to buy the business or pay for it with available funds.I have heard of tax advantages when borrowing money for this purpose.Any other advice would be gratefully received,
Thanking you in advance
beetills

[Snow Leopard]

It really worries me when a thread with a question such as this comes up.

What sort of business, who is selling it and why? etc?

Consider all your funding sources - ask a bank or two what options they would we willing to do for you and make sure you are clear on the terms.

Plug those options into your financial projections and see which looks the best.

Get some else to look at these projections: someone who will ask you the hard questions of which there are lots.

Be willing to walk away from this if it does not stack up.

Best Wishes
Paper Tiger

[Aaron]

Ignoring all the other questions that should be raised and answered first before getting to financing.

What % return do you get from available funds currently and what % will you pay on a mortgage. If the mortgage rate is more than the investment return on available funds then I would think you buy from available funds. Otherwise you will be worse off.

Depending on your tax rate unnecessarily spending a $1 to save at best 33cents tax always sounds dumb to me but as always I could be wrong.

Make sure you do a thorough due diligence before buying, give it plenty of thought.

[BIRMANBOY]

Anyone in this position should speak/consult with a chartered accountant. All of the questions you pose and more that you hadn't thought about can be answered by them. You will need to have access to all the financials for them to assist.
Being unemployed/able now for over 18 months and the time has come to take action.
Unlikely to get hired by any one as i am at an age where people don;t want you and i have very few skills(APART FROM HONESTY AND RELIABILITY) having spent my years working for Govt Departments and S.O.Es. However i am in a position where i can by a job thru buying an existing business.
What i want to know is if it's better to mortgage your house to buy the business or pay for it with available funds.I have heard of tax advantages when borrowing money for this purpose.Any other advice would be gratefully received,
Thanking you in advance
beetills

[Beagle]

Ignoring all the other questions that should be raised and answered first before getting to financing.

What % return do you get from available funds currently and what % will you pay on a mortgage. If the mortgage rate is more than the investment return on available funds then I would think you buy from available funds. Otherwise you will be worse off.

Depending on your tax rate unnecessarily spending a $1 to save at best 33cents tax always sounds dumb to me but as always I could be wrong.

Make sure you do a thorough due diligence before buying, give it plenty of thought.

This ! It never ceases to amaze me how many people are prepared to spend a six figure sum on a business and not do thorough due diligence on it.
In a nutshell
Take your time and thoroughly comb the market and ask yourself where you can add value to the business you're looking to acquire.
Compare as many different business's of that type as you can. View their financials and visit those business's.
If for example you are looking at buying a restaurant you'll want to review at least 10 different opportunities before you'll begin to get an idea of relative value.
Haggle hard, REALLY HARD, buying a business is nothing like buying a car or a house and the difference between asking and final settlement price can be substantial.
Sign up with a long due diligence period e.g. 30 working days.
Obtain financials and have them reviewed by an accountant you trust.
Look to verify turnover as purported in the financials with their GST returns and tax returns lodged with the IRD.
Never pay for alleged cash transactions. e.g. If a restaurant says they're taking $4,000 a week in cash and not declaring it the rule is you never pay for undeclared income.
Work in the business for free for at least a week during the due diligence period to see how it runs, verify the turnover, assess any staff, operational or logistical problems that need to be overcome.
Assess the lease as to fair value, fixed assets are operationally sound, systems and procedures, staff are efficient, reliable and professional and everything is basically running like a well oiled swiss watch.
Do not buy a bunch of someone else's problems. If you don't like what you see at any time walk away !!
If you are unsure as to value, get it valued by an independent business broker, (not the one brokering the deal on behalf of the vendor) !
I have tons of other advice but time doesn't allow. Alll the best with it.