Bank loan for new shop

chargerman

Evening all,
I am thinking of setting up my own store. In the village I am living in, our local store (which is quite busy) will be closing soon, due to the owners poor health. I was a manager for a few years of a store so know whats involved. The owner offered me first refusal as he knows I would be interested.
However, this is at a time when my savings are at their lowest!! I have about 5k saved. The costs are as follows:
rent-600 p/m
esb 400 p/m
rates 4,000 per year
buy stock 30,000
wages 400 per week (owner works and 2 part timers in eve)
landline 200 p/m
buy shelving off current guy 4,000
weekly sales are approx 7,000.
Do you think it would be worth asking the bank for a loan? And if so how much do you think I would get? The shops weekly sales dont exactly set the world on fire but costs are quite low. Any help would be greatful.

dave98

Hi chargerman, do you have any other expenses car loans or morgage etc

lucky john

Below is a link to 8 different excel business templates. If you spend a while putting your figures into them it might answer a few questions for you. The bank will look for something like these as well.

http://www.smallbusinesscan.com/downloadable-excel-financial-spreadsheets/

ResearchWill

chargerman wrote: »

Evening all,
I am thinking of setting up my own store. In the village I am living in, our local store (which is quite busy) will be closing soon, due to the owners poor health. I was a manager for a few years of a store so know whats involved. The owner offered me first refusal as he knows I would be interested.
However, this is at a time when my savings are at their lowest!! I have about 5k saved. The costs are as follows:
rent-600 p/m
esb 400 p/m
rates 4,000 per year
buy stock 30,000
wages 400 per week (owner works and 2 part timers in eve)
landline 200 p/m
buy shelving off current guy 4,000
weekly sales are approx 7,000.
Do you think it would be worth asking the bank for a loan? And if so how much do you think I would get? The shops weekly sales dont exactly set the world on fire but costs are quite low. Any help would be greatful.

Those figures are very tight

Rent esb and rates are 16k per year, wages add 20k so total of 36k landline adds 2400 total 38k insurance I guess 1k bank charges 1k total now 40k. I am assuming the 400 a week is for the part timers. Waste charges will add at least another 1k a year assuming no food waste. Assuming loan of 40k interest payments assuming good interest rate 2500 so now total 43500 allowing mis of 1.5k total costs 45k

Turn over I hope 7k is plus VAT (but for assumption includes VAT) and also is that excluding Topup lotto and cigs, assuming it is not then total turn over 350k a year if you run a tight ship on margins and get gross of 20% then Gross profit is 70k, so net profit for you 25k.

It's tight and a lot depends on margin and if turn over includes VAT but you need at least 45k to cover costs.

The Apprentice

i dont really have much to add only that landline for 200pm is that needed ?? Im assuming its for lotto/Laser ?

Its nothing to write home about essentially you could be paying your self an inflated wage to either get a better tax rate, or the corpo tax rate - you would need to speak to your accountant to see which you would be better off doing.


Forgot to mention .. that 400 a week ?? that correct ?? I wouldnt be taking on a 350k turnover business and making minimum wage with all the hassle involved etc ?? This needs to be clarified

TheCostumeShop.ie: Ronan

The Apprentice wrote: »

Forgot to mention .. that 400 a week ?? that correct ?? I wouldnt be taking on a 350k turnover business and making minimum wage with all the hassle involved etc ?? This needs to be clarified

400 a week is for the part timers, op is probably hoping to live off the profits. Op you should be factoring in a wage for yourself (someday you might need a holiday and have to pay a full management wage). Don't forget their holiday pay, sick pay (plus replacements) and PRSI etc.

Also insurance; money aside for unforessables - burst pipes etc; slippage, fraud and theft.

Your best bet i would image is to vendor finance from the guy who is selling the business and try to pay for it out of cashflow from the business. Banks are very very difficult to deal with if your in the retail trade.

Chevy RV

Hello Chargerman,


You really need to do a proper cashflow to see if it is a viable proposition. Make sure to include VAT and PAYE /PRSI for employees in to consideration as well as drawings for yourself.

The rent should include a charge for the Fixed Assets like shelving. The rates can be appealed at €4,000.The stock should be paid for out of the 1st month's turnover a looks a little high in relation to the turnover. Telephone is definitely high at €200pm .

I would not recommend you borrowing any money. The owner may not have many options and should be happy with a reliable tenant which can provide them with an ongoing rental income.


Regards,


Chevy RV

DubTony

After expenses at a (not very good) 20% margin which would be the worst case scenario, at current turnover you'd be left with 2800 a month. This is assuming the turnover is excluding vat.
If the turnover includes vat you'll have less than 2k a month profit. (That allows for vat at an average of 16%. If grocery sales are high, you can reduce that figure, but with the prevalence of phone top ups and vat rated services, on such a small turnover, I fear I may not be too far off the mark here)
A bank is unlikely to lend based on that figure, unless you've another salary coming into the house.
Have you considered talking to the owner about seller financing (you pay him the agreed amount over an agreed period with a set interest rate). It's becoming more common these days. Your solicitor should be able to help.
If you can see some way to increase turnover and improve the margin while keeping the costs down, this could be viable. As it stands, without seller financing, you'll be looking for a personal loan. Credit union? Tell them you're doing up the house.
It'll be tough to make a decent living though. It's a "buying a job" type situation.

PM me with more details if you wish to discuss more.

sandin

as per DubTony, seller financing is probably best option. But the figures don't look great.

Would the present owner allow you run it for 6/12 months as a full time manager and then have the option to buy?

cookie80

I'm in the same boat. Scary stuff but I always wanted to do it and I'll know in years to come I'll regret it if I don't do it.

Best of luck.