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Valuation methodologies accepted by banks for buying a business


Gen-eva
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I am coming from Australia, with my dual-citizenship husband, and am interesting in buying a food business. As I intend to spend quite a bit of money, I was wondering if anyone had any knowledge of valuation methodologies used by french banks for the valuation of businesses (not the underlying real estate, mind you). I've trained as an accountant in Australia (but not working in it). So I am guessing its Discounted Cashflow Flow methodology, because thats what I learnt at uni. Also, does France use Chartered Surveyors (members of RICS) to value these enterprises - cafes/restaurants/pubs and the like. I've had a look at Christie.com, which lists these types of enterprises around the world. If anyone can give me an idea of discount rates (to feed into the denominator in the equation), I'd be eternally grateful. And am I looking at the sum of the 5 years? What about other valuation methodologies? And for the numerator are we looking at the normalized cashflow (after social contributions, but before income tax). Help, this is such a confusing thing, even for me. 

 

Also what about vendor financing? Is this quite common? Or will banks lend against the business itself as security? Now I am talking fairly decent businesses with a couple of employees, not tiny businesses.

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As you are intending to spend quite a lot of money, you absolutely must engage the services of a suitably qualified accountant or lawyer in France to advise you on this potential business transaction, as any business acquisition venture in France is fraught with bureaucratic red tape and I would doubt that anyone on this Forum would feel qualified to advise. (Most Brits in France are retirees.)

As for bank lending, the situation in Europe is very difficult at the moment with the recession and Eurozone crisis, so finding a French bank willing to lend to a current non French resident who will not have a French credit history to buy a business in France, will be very difficult if not a non starter.

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I agree with Sprogster. I have had 2 mortgages and several loans, sizeable to me (in the 1000s) but nothing in comparison to a business loan.

I was able to get these because I have been declaring my income to the French tax authorities since 1995, and had an income in France that the bank could check.

Not only have French banks taken a pounding over their holdings in Greece (and that looks to get a lot worse) they are also much more suspicious of non-French people and sources of income than some other banks.

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