What do you think of this guys credibility?...

[cqueen]

http://www.small-firms-loan-guarantee.co.uk/

He's saying that 90% of applications for a DTI small firms loan gaurentee are rejected, but if you go to him first he'll sort out your business plan so that they will accept it.

He claims to have a 90% success rate and if you get the loan, you give him a cut.

The only thing that concerns me is that it doesnt say anywhere that he worked for the DTI or actually knows how they operate.

Is he not just the same as any other business advisor but with a different spin on things?

[DuaneJackson]

Sounds dodgy to me. We got a SFLG loan a year or so ago without much difficulty. Although I have heard a lot get rejected. There were changes to the rules last year that make it even harder I think. I read it in a magazine somewhere.

If you want me to I'll see if I can find the article and scan and email it to you.

[cqueen]

Yes please!

[DuaneJackson]

I've just flicked through the copy of Total Business I have here, it doens't seem it be in there. It may have been in YEM, I'll have a look when I get home.

[DuaneJackson]

If you want to search on it, it was the "Graham Review" - these two articles cover most of it.

http://www.thechilli.com/articles/misc/069_SFLG.asp

http://www.bytestart.co.uk/content/taxlegal/9_11/small-firms-loan-guarante.shtml

[cqueen]

Thanks for that, as you're familar with the sflg perhaps you could answer a couple of questions...

quote: 'remember that SFLG only covers 75 percent of the lender’s exposure'

what does that mean exactly? that I have to find 25% of the money required, myself?

quote: 'As has been commented, SFLG is not for funding a start-up or its initial R & D'
...........riiight, so it's not for start ups? I kinda thought that was the whole point?

[DuaneJackson]

I may be totally wrong on all of this, it was some time ago, but....

the 75% stuff means that the guarantee only covers 75% of the value of the loan... so you either need to provide security yourself for the remaining 25%, or your bank needs to take the risk on not having the 25% secured. I think we did the latter.

The money is not to be used to R&D costs but should be specifically to fund growth. R&D doesn't directly generate any cash and I think it's seen as more risky than being used for marketting for instance. I think it may also be a requiremnt that it's not used for salaries. Atleast not directors salaries anyway.

Also, I'd really strongly suggest you look at raising finance through equity rather than debt. We got a £25k SFLG loan a year ago and recently got a lot more as an investment (for which I gave away a big chunk of the company). I wish now I didnt get the loan and went straight for the equity deal. It means you don't have a big loan hanging over your head with monthly repayments and also an investor brings more than just money to the table.

[DuaneJackson]

Sorry, another note. Are you aware that one of the main criteria is/was that you don't have any property on which to secure the loan yourself?

I was just about to buy a house and I delayed completion so we could get the SFLG loan through first. Also it exposed my then partner as a bullsh*tter - he'd led me to believe he owned a property but it turned out he didn't.... that's a whole other story though )

[cqueen]

Wow you really are the prefect person to talk to about this.

So, say I needed £30k. I can't GAURENTEE that people will buy my product, but I've done my best to prove that there is a market there for it.

I guess it entirley depends on what they think of the business concept.

But you say I should offer equity, to what value or % do you think they would be looking for? I can estimate profit in the first year being anything between £15k-£130k really depends how popular it is!

no, I dont own property, finally something to smile about :D

[DuaneJackson]

no, I dont own property, finally something to smile about :D

Exactly how I felt at the time : )

It does really come down to what they think of your business concept and wether you've proven it can work. How long has the business been trading? Is it a speculative venture or have you already proved there is money to be earnt? Do you have a 'tamed' bank manager?

The equity side of things it toally serpate to the SFLG - the bank wouldn't be interested in equity I don't think. It's just an alternate route to raising money. The amount of money you'd be able to get and the amount of equity you'd need to give would totally depend on the investor and the terms of the deal. You'd very rarley get away with less than 20% and it could be up to 70%. Have a look at www.profitengine.co.uk

If your business is internet related then it may be worth searching on "Second Chance Tuesday" and going to one of their events.

[cqueen]

It hasnt started trading, I need the £30k for equipment and insurance, other services etc.

There are a couple of similar versions of what I'm doing in London and Ireland, they seem to be doing well!

Tamed bank manager....hmm not really, I wasnt impressed with being fined £35 for a unpaid direct debit! Plus my first business isnt exaclty thriving!

Hmmmm see I dont want to go blabbering to potential investors because it would be so easy for them to do it without me.

[DuaneJackson]

It hasnt started trading,

I may be wrong, but I think that alone will mean you have next to no chance of getting it approved.

Most investors don't want to do anything themselves. They'd rather let you do all the hard work yourself and they reap the rewards!

I'd wriite off SFLG as even being an option a this stage.

[cqueen]

Bugger :evil:

[amcphillips]

I should offer a similar service to this!!! I worked for the Treasury so know how it all works! :wink:

[cqueen]

Ok, so, say I wanted to find 2 investors with £15,000 each.

Bearing in mind they would be able to use the service themselves for free which alone is worth over £10,000 p/a (more of a bargining tool really)

what would I offer them in return for their investment?

[amcphillips]

If you're not talking about banks and more venture capital style then you'll be looking at a share of your company and therefore your profits

[DuaneJackson]

I was thinking about this on my way home just now.

If you went to an investor now you'd either politley get told to go away or you'd get a very bad deal. The problem is that it's a very high risk investment - you have no order book and no customers. Do you have any other successful business in your past? IF so then that'd go in your favour.

You'd be much better off raising the 30k from friends family and fools + high st bank loan (to buy a car ofcourse) and anything else you can scrape together. Then, if you took investment further down the lin you'd get a much better deal.

In your above scenario - for theor return you'd offer them a percentage of the business and/or a set cut of the profits for a period of time.

I think I just remembered what the business is from you mentioning it before. I'd have thought it's the kind of thing an investor would like because it's a little bit glamourous and it's something they would indeed enjoy using themselves.

[cqueen]

Yeah well, I was thinking along the lines of say £1k = 1%.

I dont really have any rich family apart from my dad who has no interest in risk what-so-ever and thinks I'm an idiot for even atempting it!

Nothing like the help and support of your family eh?!

[amcphillips]

The best way I'd say is to ask yourself what % of total funding you want them to invest. If they are going to fund 50% of the start up cost then expect them to ask for a 50% stake in your business!

[cqueen]

Hmmm tricky business.