Funding a Business initially

[poochieparlour]

Hi all

Not sure if some of you rmember my posts or not, a while ago I was looking at opening a small outlet, selling cakes, pastries, sandwhiches etc

Long story short, we have put in an offer on a place, subject to funding

Ok My question is, which is the best way to fund a business:

1. Business loan? In 2 peoples names?
2. Personal Loads?
3. Any other method?

We are looking to borrow around £25k I would guess in total, to help re-brand, re-decorate and exisiting shop, but curious as the best way to get funding would be

we do have a mortgage on a flat, if that should help for colleteral

Thanks!

Mark

 

[oldeagleeye]

Hi Mark.

I am not having a pop at you but I think that you are being a bit naive think thatyou could get a business loan to open a shop especially if it is the full amount and you are putting in nothing yourself.

Have you not watched TV or read the newspapers over the last 18 months. Almost every day from the last months of the labour gov to this one the stories are out there about the banks not lending to even well established companies.

The only hope you would have there then I think is if you have a very friendly bank manager for your dog grooming business and I can see a problem there.

The first thing the bank would say is how come your not earning enough out of that to fund this proposed new business venture. Now I don't know how that is doing but to fund a loan of £25K over 5 years you should be making a surplus of around £7K on your present business after all expenses and wages.

As regards of your flat being put up as security - do you have £30K - £35K equity in that because that iks how much the bank would want to see.

As for your other options. I think the only other one is a personal loan if you have a really good credit rating but then only about £10K and if you say it is for a business start-up you won't even get that.

If you need to then you would have to tell a few porky pies and many people do and say it is for a car or home improvements and the latter is the best option.

If you got that loan and don't expect it tgo be cheap despite what you see advertised your still going to have to make up the balance. Your credit card perhaps. If you start applying for more plastic it will affect your credit rating.

Anyway mate that's my view and not so much advice but the situation that you face. Hope it helps.

Rob

 

[poochieparlour]

No offence taken

This business is unrelated to the Dog grooming, business.. I created this profile when my Mum opened Poochieparlour and posted on their behalf. So just so everyone is aware its not the same business

I appreciate the reply, and I dont know about Business I admit that, hence why I posted on here, I didnt really "expect" to get a business loan, more of hoped to be honest with you, but perhaps I have no chance in hell, in which case I wont open one

Thanks again

Mark

 

[oldeagleeye]

I take it your quite young then mark in which case I would forget coffee or sarnie shops & cafes. It is a 6 day week and 12 hour day just to make a living. Not exacly for the lifestyle of a your man your be wacked out all week and want to sleep all day the one day a week u do get off.

You do have one sensible option if you come up with a better project and that is the Princes Trust if your under 30 but even there funidng is becoming more difficult to get.

Our man Charlie however does take a keen interest in the trust however and if you come up with an idea the trust managers know the prince would like you might stand a good chance. Now I can't think of anything off the top of my head but if you can match any of his interest with your own skills you could be on a winner.

Now I am not sure how much you know about our Charles but his main interests are

Achitecture. Environment. He is a keen Watercolourist. Grouse Shooting - Salmon Fishing - Show Jumping & Horses and of course he has his own Polo team.

Good luck

Rob

 

[emailexpert]

Following on from Robs comments he is keen on organic food, local produce etc

Definately angles for combining food & Charlie...

 

[poochieparlour]

Appreciate the replies

I am still failry young, yes... I am a chef and have been working as a chef for the lst 4 years, being tired all the time isnt a concern offine to be honest, as thats how I am now

I appreciate your advice, I am just looking for something small, and local that we can make good food, but getting out of the whole hot kicthen, thankless indusrty I am in, while still creating good, honest food

One day maybe

Mark

 

[elaine@cheapaccounting]

Have you got a business plan? Doesn't have to be a formal, long winded document but at least an idea of:

·Business Overview
·What you plan to sell or offer
·Markets and Competitors
·Marketing and Sales
·Key Personnel
·Operations
·Information Technology (IT) e.g. stock control, POS etc
·Key Performance Indicators (KPIs)
·Financial projections

Will the business make a profit? When? What will the return on your investment / time be?

 

[poochieparlour]

Hi Thanks for the reply
We have got a business plan and are working on a financial plan too, the business is up and running already and has low rent costs, It has much more potential than what it is currently being used for, and I can see where it is worth going for.. Ofcourse lenders might not see it the same way as me ofcourse

We spoke to a bank some time last year when enquiring about loans, they didnt say yes, but didnt say no, they said to refigure things and come back, so there seemed a chance back then, and this business we are looking at is cheaper to run and is making money currently

Just a case of intial funding to buy/re-decorate etc

 

[oldeagleeye]

Mark.

Your are still in self denial. No bank is going to lend you the full purchase price without any contribution from you even if you had the best business plan in the world.

Elaine also made an important point. Key personel. The bank are not going to regard a couple of part-time help as key prsonel and you said yourself you have no experience in runing a business like the one in question. It as I said before is damned hard work and at best a living wage for an owner manager and quite frankly I don't care what you profir expectations are you wouldn't be able to afford to pay back a £25K loan over 5 years. In fact your be lucky if you can afford to take the min wage yourself.

I am not knocking your enthusiam mate but you have to be realistic.

r

 

[elaine@cheapaccounting]

Elaine also made an important point. Key personel. The bank are not going to regard a couple of part-time help as key prsonel and you said yourself you have no experience in runing a business like the one in question. It as I said before is damned hard work and at best a living wage for an owner manager and quite frankly I don't care what you profir expectations are you wouldn't be able to afford to pay back a £25K loan over 5 years. In fact your be lucky if you can afford to take the min wage yourself.

I am not knocking your enthusiam mate but you have to be realistic.

r

Agreed

Often when the detail is hung against the headings above the likely success or otherwise of the business becomes pretty clear.

As I say - doesn't have to be a grand document but the ability to articulate the salient points about how the business will operate is key IMO to any start up whether it be for the bank or otherwise.

 

[poochieparlour]

Thanks guys

I appreciate what you are saying , well, all I can do is keep saving and wait, no major hurry in my eyes just something for the future

 

[Gillie]

Mark, at the moment money is very hard to get out of anyone. The main things the lenders are looking for at the moment, is firstly do you believe in it to put your money where you mouth is, and we are not talking of the odd thousand here and there, and also the buzz word of the moment - affordability.

Contrary to what some think - lenders want to be repaid and in full and whilst you thinking offering a property for instance as a second charge is going to get you the loan - lenders dont look at it like that.

If they have to call in any security, they are looking at considerable costs to cash in - so this is only used as last resort as they often dont cover the outstanding costs.

So you need to show that you can afford the repayments without struggling - they need to have the confidence that you will repay them on time.

For the kind of plan banks like to see, from the years I have been involved in getting clients money I wrote this as a starting point for those wishing to approach lenders.

 

[poochieparlour]

Thanks for the info, and I appreciate the link, will have a read

 

[poochieparlour]

Can I just ask you guys, as you lot have experiance in Buisness already

How much roughly, would you say would be needed, as a start off point to get a loan of, just an example 25,000? I can understand why a bank wouldnt simply give you the money, it was hard enough at 21 getting a Mortgage


The business we were looking at simply came up, and it was something we wanted to jump straight into in terms of begging for loans, dont get me wrong. But it would be helpful to know roughly how much we would be expected to put in compared to how much they would lend

 

[oldeagleeye]

Mark.

It is a pointless question for a number of reasons. The main one's being that you have no track record in running a successful business.

2) You have no experience in running this particular type of business and as I said before and repeated so many times to people that thinkthey can make a fortune out of running a pub. You cant. At best you will earn a living wage.

You ask your mother. I once bought my ex wife a dog grooming buiness. It is bloody hard work and a cafe/sandwhich bar even more so.

Any hight street or secondary retail operation is now also a no - no as far as lendi8ng by the banks s go unless you can find a niche market and there there are I believe opportunities and one in particular I thought of last night.

Most of the cycling repairs shops hops went years ago but cycling is becoming ever more popular. Boris Johnson in London has just bought 3,000 of them and Barclays or sponsoring the hire scheme in which case a an application for a loan to open a cycle repair shop might go down well.

What with Prince Charles being into all things green you could be well up front for a grant.

Look at niche markets then Mark. A sandwich bar aint one.

r

 

[Emma47]

Hello,

For existing business owners and prospective entrepreneurs who have a great business idea worth chasing, finding seed and early stage funding may be a difficult task. Companies that seek small business capital may choose bank loans or even use their own personal savings if the startup costs are not too high. For most companies, regardless of size, venture capital funding may serve as the best choice.
Thank you

 

[Tom McClelland]

As it happens I know someone who is making an absolute fortune out of a coffee/sandwich/toastie/ice-cream/smoothie shop in the right location.

But he didn't spend £25k fitting it out and "creating a brand" when he was starting up. He would have viewed that as a complete waste of money.

The first thing you need to do is go through every single item in that £25k really savagely.

• What can you buy second-hand? (Fridges, tables, chairs, coffee machines, crockery and cutlery, street blackboard etc)
• What can you do yourself (You don't need expensive branding, just give the place a lick of paint yourself) THE PUNTERS WON'T CARE, in fact many may prefer a place that doesn't look too slick.
• What isn't needed at all to get you going? You can get that second coffee machine later.

Every penny that you spend getting the place up and running has to be paid back out of future profits, and you'll have great difficulty getting anyone to lend you anything anyway.

 

[akirk]

As it happens I know someone who is making an absolute fortune out of a coffee/sandwich/toastie/ice-cream/smoothie shop in the right location.

But he didn't spend £25k fitting it out and "creating a brand" when he was starting up. He would have viewed that as a complete waste of money.

The first thing you need to do is go through every single item in that £25k really savagely.

• What can you buy second-hand? (Fridges, tables, chairs, coffee machines, crockery and cutlery, street blackboard etc)
• What can you do yourself (You don't need expensive branding, just give the place a lick of paint yourself) THE PUNTERS WON'T CARE, in fact many may prefer a place that doesn't look too slick.
• What isn't needed at all to get you going? You can get that second coffee machine later.

Every penny that you spend getting the place up and running has to be paid back out of future profits, and you'll have great difficulty getting anyone to lend you anything anyway.

absolutely right!
look on ebay for kit - amazing what is on there as collect only - travel to get it and it will be a steal - lots of kit from restaurants / coffee bars / etc. - not sure why they must be closing down...

Alasdair

 

[Annoying Donkey]

How about packing some boxes with sandwiches and goodies and do a trip around the local business park each lunch time... Use the proceeds to expand this type of business until you have 25k+ equity, then sell the business and buy the one you want?

 

[Cloughie]

Hey I also live in Cambridge and am looking for a kitchen for a food related business - maybe we could help each oher out?

Pm me your number!