Investment... Take it or Leave it?

[Michal Szlas]

Hello Everyone,

My company has been running for 8 months. We sell goods online using a 3rd party warehouse to store and ship, currently outside companies to run marketing and employ 4 staff to deal with Customer Services. I've been offered an investment deal which would bring 150k in cash (minus fees, circa £30k) plus unspecified amount of help from a large PR & Brand building agency.

I have been steadily increasing my turnover with a total of just under £300k last month and looking like £350 this month. Total turnover in the first year will be around £1.5m.

Investors want to take around 6.25% for the £150k.

Would anyone be able to advise whether it would be worth it? My initial opinion is that it isn't a good deal.

 

[S2K]

If you need the cash and you are happy with what you need to give in return (is it only interest or do you give away equity too) as well as with the conditions, go and discuss it with your accountant. The help here is limited as you don't disclose (and I would advise you to think twice before you do) some very relevant details.

 

[Ian J]

I've been offered an investment deal which would bring 150k in cash (minus fees, circa £30k)

Investors want to take around 6.25% for the £150k.

That seems very expensive as the interest rate is 20% flat rate.

The first thing you have to look at is how much profit you are currently making and compare that with how much money you could make with the additional funding

 

[Chris Ashdown]

6.5% interest or Shares

 

[The Byre]

1. What are you going to do with the £120k and how long would it take you to generate that sum from revenue?

2. What can these people bring to the party, other than cash?

3. What is their exit plan, down the road?

 

[Clinton]

My initial opinion is that it isn't a good deal.

Why?

And what does your corporate finance adviser say? (Or are you winging it without external advice?)

 

[billmccallum1957]

Important point...how much is the profit ? (Gross & Net)

 

[Dyldor]

10% of your estimated yearly revenue for 6.25% of the business seems like an acceptable deal to me. What would the money be used for? Also, as mentioned above, you want to compare the figure offered to the profit of the business.

 

[J2DHS]

As a few people have already mentioned, it depends on your profit levels.

Personally, I would be hesitant to take on any investment if I were running a business with £300k a monthly turnover after only 8 months. You're obviously doing something right!

If you don't need the money, why sell a share of your company?

If you are looking at utilising their Branding & PR knowledge, or there's someone involved in the deal you're looking to learn something from perhaps, why not look at how much other firms will charge you as a customer or find a business mentor that doesn't want 6.25%?!

If you're not profitable, then maybe it's a good call to help drive more sales or improve your margins - it really does depend on quite a lot!