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kempstar

Sources Of Funding For New Business

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Hi there

Im looking at starting my own business, and am looking at sources of funding. Hopefully there will be a few people here that have done the same. I have a few questions....

1) I have £25k in my bank account stoozed from three credit cards: Egg (£10k till 1st June), Cooperative Bank (£10k till 1st November) and MBNA (£5k till mid-November).

I am hoping that this will mean that I should be able to secure personal loan(s) up to this value (if necessary by approaching each of the lenders seperately). Do you think it would be best to apply for a loan, stating it to be for the purposes of debt consolidation, or pay off all of the credit cards before applying for a loan(s)??

2) Does anyone know of any grants/preferential terms loans that may be available from the government or other?

Many thanks in advance

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Guest muttley

It's nearly 17 years since I approached my bank for a loan to open my business.Maybe I'm out of touch,but here goes.

The bank's main objective is to make money from you.If they don't do that, then their priority is to get their money back.

For that reason they like to see you put some money in yourself.It gives them a cushion, and it demonstrates your commitment.The will ask to see your business plan, and your projections, but what will really impress them is if they cannot lose.

Stoozed money counts for nothing.

Government grants? Probably not.Depends what your business is.

Good luck.I hope I haven't discouraged you.Starting your own business can be very rewarding, both financially and in terms of personal satisfaction.

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Move to Wales, learn Welsh, open a Welsh language QUANGO - get as much grant money as you can stuff into your pockets IMPO. Do a runner. That, IMPO, appears to what has gone on for 25 years now.

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WOW, what has happened to people??

Borrowing money is not a business.

WHERE are you going to make a return?\ That is where you should start, figuring out HOW to make money

Wow, thanks for your 'help' :rolleyes:

I know exactly how I am going to make a return from the venture. I am now looking at how I am going to fund it. Hence asking questions about sources of finance. My main issue was whether I should pay off the credit cards first before seeking a loan, so that it does not look like I am in debt (which I am not). But it seems that banks are more likely to lend money to those already in debt, rather than those who are not. Hence my question.

Edited by kempstar

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Sounds like you like risk, what you are doing is pretty dangerous if it backfires. don't lock in at a high rate if you borrow you should be getting below 6.5% unsecured offers with a good credit file and 25k to consolidate you are an ideal customer.

The best thing to do if you are trying to look good to a bank as a creditor is get 2 x 0% cards a month for a few months they will look at your credit file and see how much of your total borrowing you are using. If you are maxed out on your cards you will find it harder to get new lending best idea is to pay back about 16% of the balance on each i.e. run them at about 84% balance and have a few cards you are not using at all. That will make you very attractive for new lending as it looks like you are a slow payer (by this I mean you pay on time but take ages because you are in debt up to your eyeballs and can just cover the interest but haven't got a chance of clearing the capital that is the banks perfect customer) it also helps if you have paid it back for more than 6 months. Sounds like you have healthly limits so you should look to get more cards before you secure it long term even if you just put small balances on them the banks just see the 0-8 a number based on how long you take to pay the debt back. Get loads of 0's on all cards and 84% balances and they will love you. Make sure you get cards from non tied companies to start with a lot are run by MBNA for example.

Be careful as this is your personal debt if you lend it to your company it can pay you back the interest without an income tax implication. Banks don't lend to businesses unless they are doing really well even then they don't like risk at all. There is somethign called the Small firms loan guarentee scheme where the governement back the loan but it might be more hassle than it is worth setting that up depdending on how much you are borrowing.

The SFLGS should allow you to borrow 100k with just a business plan and from the company and then if your idea doesn't work the government takes the hit but I am not too sure about that just heard about it from someone who did it. IME government programs are just a headache. You could also approch angel investors depending on the idea they may back you for equity the BVCA is a good place to start a search.

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I'm at night school at the moment on a 'start your own business' course.

1) I have £25k in my bank account stoozed from three credit cards: Egg (£10k till 1st June), Cooperative Bank (£10k till 1st November) and MBNA (£5k till mid-November).

I am hoping that this will mean that I should be able to secure personal loan(s) up to this value (if necessary by approaching each of the lenders seperately). Do you think it would be best to apply for a loan, stating it to be for the purposes of debt consolidation, or pay off all of the credit cards before applying for a loan(s)??

Worth little or nothing in the eyes of the bank. They'll want to see collateral, not debt.

It's nearly 17 years since I approached my bank for a loan to open my business.Maybe I'm out of touch,but here goes.

The bank's main objective is to make money from you.If they don't do that, then their priority is to get their money back.

For that reason they like to see you put some money in yourself.It gives them a cushion, and it demonstrates your commitment.The will ask to see your business plan, and your projections, but what will really impress them is if they cannot lose.

As relevant today as 17 years ago. My course tutor explained exactly these things to me less than a month ago.

2) Does anyone know of any grants/preferential terms loans that may be available from the government or other?

There are grants available but you have to meet conditions to get them. You have to be seen to be adding value to an area that needs an economical boost and be able to provide long term employment. Grants are usually awarded to people setting up in deprived places to help them bring some hope and employment to the area. One of my main reasons for setting up my business is to make enough money to be able to escape from the grot-ridden area that I currently work in. The last thing I want to do is set up somewhere that I'll have to continue to put up with it. It's one you need to think about therefore. I can live without grants if they mean I have to commit to immersing myself in the very thing that having my own business is supposed to give me a passport out of!

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Move to Wales, learn Welsh, open a Welsh language QUANGO - get as much grant money as you can stuff into your pockets IMPO. Do a runner. That, IMPO, appears to what has gone on for 25 years now.

And despite that Welsh still has no swear words? B)

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Hi there

Im looking at starting my own business, and am looking at sources of funding. Hopefully there will be a few people here that have done the same. I have a few questions....

1) I have £25k in my bank account stoozed from three credit cards: Egg (£10k till 1st June), Cooperative Bank (£10k till 1st November) and MBNA (£5k till mid-November).

I am hoping that this will mean that I should be able to secure personal loan(s) up to this value (if necessary by approaching each of the lenders seperately). Do you think it would be best to apply for a loan, stating it to be for the purposes of debt consolidation, or pay off all of the credit cards before applying for a loan(s)??

2) Does anyone know of any grants/preferential terms loans that may be available from the government or other?

Many thanks in advance

I've started the odd business or two ;)

There are a number of grants you can get but it's quite complicated and it varies by region. Your best bet is to contact your local enterprise agency to find out what's available to you, they are usually very helpful. If you are under 30 there is a special one doing the rounds at the moment to encourage younger entrepreneurs.

The best way to raise money though is by finding private investors (business angels) to invest in your company. However you need a pretty good idea and a good pitch to attract them.

A business loan is an option but banks generally require you to sign up to personal liability on any money your business borrows. There is the small firms loan guarantee scheme which allows a bank to loan you up to 250K with the DTI guaranteeing 70% of it. I'm not sure if they are available to start up's though since when we obtained this we had been running for several years.

Anyway as I said your local enterprise agency should be able to tell you everything that's available to you. Good luck with it.

Edited by DoubleBubbleTrouble

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Thanks very much for your help.

Maybe if I explain the situation a bit more clearly that may help.

There are going to be two of us starting up this company. One of us is very, very wealthy. The other one is me ;)

There is not a problem in terms of raising the capital to start the business. The issue is one of ownership. I want to try and put as much capital as I possibly can into this, so I own a decent chunk of the business. I dont want to end up only putting a tiny amount of the capital in and then owning only a tiny amount of the company (I might as well stay in my current job).

We are looking at starting trading in September. From the figures we have put together so far, I think we have a working capital requirement of £150-200k for the first three years. we have projected that monthly cashflow will turn positive in around 6-8 months, and the breakeven point for the business will be some time in early 2008.

Realistically, the absolute maximum I am going to be able to raise personally is going to be £40k: £10k savings, £5k from parents and £25k personal loan.

Ill look into that grant you mentioned for young entrepreneurs, I am under 30 (just)

Thanks again

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Thanks very much for your help.

Maybe if I explain the situation a bit more clearly that may help.

There are going to be two of us starting up this company. One of us is very, very wealthy. The other one is me ;)

Actually I was in a very similar position 6 years ago, although there were 3 of us involved, one with a significant amount of money to invest.

It was a real pain as it really complicated things at the start. In retrospect we should have formed the company then brought the 3rd guy in as an investor at a second valuation.

There is not a problem in terms of raising the capital to start the business. The issue is one of ownership. I want to try and put as much capital as I possibly can into this, so I own a decent chunk of the business. I dont want to end up only putting a tiny amount of the capital in and then owning only a tiny amount of the company (I might as well stay in my current job).

One tip, are you bringing any asset's into the company, e.g. software you've written already? If so you can value these as you wish and set that against shareholding.

Also don't forget to investigate the Enterprise Investment Scheme (EIS) if your company's business comes under it's mandate... your main investor could get some considerable tax benefits in the first instance with it, and if you are successful you could benefit too on the way out. The main problem is it'll involved setup costs, best to get someone who knows what they are doing.

We are looking at starting trading in September. From the figures we have put together so far, I think we have a working capital requirement of £150-200k for the first three years. we have projected that monthly cashflow will turn positive in around 6-8 months, and the breakeven point for the business will be some time in early 2008.

Realistically, the absolute maximum I am going to be able to raise personally is going to be £40k: £10k savings, £5k from parents and £25k personal loan.

Ill look into that grant you mentioned for young entrepreneurs, I am under 30 (just)

Thanks again

Try not to bankrupt yourself, if things don't go to plan you may find that you have to work for no income for a period of time...

Good luck, be prepared for a lot of hard work!

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if you will be putting in more time than the wealthy guy, make sure you get some options . provides incentine, becase you can exercise later when the business is thriving

Good idea in principle but from our own experience we found 2 problems in practice with that;

1. Setting up the scheme in the first instance costs the company money which might be better used elsewhere

2. Problem with options are they are Income Taxable these days. We found out the hard way that if you get bought out by another company (usually quite likely with successful start ups) then you end up getting taxed at the point of the sale which can be a lot of money! We got particularly screwed on this one as the company which bought us placed a 3 month embargo on selling our newly acquired equity, so we had to fund the option the income tax in the first instance, out of our own pockets, and then take a 3 month gamble on the new shares retaining their value (which they didn't!).

So my advice is be very careful on this one.

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Thanks very much for your help.

Maybe if I explain the situation a bit more clearly that may help.

There are going to be two of us starting up this company. One of us is very, very wealthy. The other one is me ;)

In which case I wouldn't bother will the local enterprise agency, they're only interested in basket cases yet they will waste your time so they can claim their fee, then you'll get the bad news ;)

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
      • up 2.5%
      • up 5%



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