The risk of maintaining loan income
The risk of maintaining income (and achieving a reasonable return) is not the only risk in purchasing a business. Another is the risk in getting one’s money back (as has been mentioned above with the high street bank or the gold mining venture). This risk also arises when you contemplate what might happen to your investment if the subject business closes down.
Where a business has strong tangible assets, such as real property or modern plant and equipment, there is a greater chance of a recovery of capital on close down and disposal than when a business has very few tangible assets. Consequently, (all other things being equal) the capitalisation rate used to value an asset-rich business is usually higher than for an asset-poor business.