Start Up Finance

[Shunmas]

Hi all !

I am considering starting a new business. Is it possible to get all the required financing from a bank based on a perfect business plan and without having a single penny of saving of my own?

Thanks

[Ray Stewart]

Even in the good times this would have been unlikely.

Why would a bank invest in a business that you yourself are not willing to invest in?

If you produce a good business plan (a perfect business plan doesn't exist), if you have done your market and product research properly, if you have started the business and can prove your early successes exceed your original plans, then you may get 50% of the investment you need from the bank matched by the other 50% coming from you.

If it were so easy, why do you think dragon's den exists? Why do you think the papers are full of bank stories bemoaning the tight limits being imposed on even successful businesses at the moment?

[matt.chatterley]

Originally Posted by Ray Stewart

Why would a bank invest in a business that you yourself are not willing to invest in?

In his usual, inimitable style, Ray has phrased this beautifully.

When a bank lends you money to start a business, it is NOT a traditional "loan". If you think about it, you can easily see the point that they are taking a considerably higher risk than they would be if they were faciliating personal lending.

It's key to use the word "invest" when talking about funds going into a business.

Is so called "angel" investing an option for you to help provide some of the money you need?

Also, if the figure is large, is there a way to reduce it?

[fundingportal]

Hi

I'm afraid even the biggest optomist will struggle to give you a positive response on this one!

Every start-up business thinks they have the greatest business plan; in reality only time can indicate which ones really work.

Banks, and all 'conventional' lenders want to know how they will get repaid - this comes down to 2 further questions - how the business has performed historically and what the fallback situation is if it all goes wrong. In a new start, the former is irrelevant, so any lender will want to know what assets the directors have and how they can get security over them.

Sorry!

On the slightly more positive side, contact your local business link, as there might be specialist grants or funding available; alternatively, if the proposition is really good angel or equity funding might be a possibility.

[FishBowl]

Having started her business, Rico Mexican Kitchen, recently, Marcella is having real difficulties getting funding.

She had a business plan, and put in what she could -you can read more here: Follow Marcela and her Mexican Kitchen Business on in a fishbowl | IN A FISHBOWL

What advice would you give in her situation?

[fundingportal]

The article tells us about Marcella and her dream; it doesn't actually touch on financial realities.

Does Marcella have assets to back a loan application?

What is the state of the business P & L / Balance sheet?

She certainly needs to look beyond the traditional bank loan, she might consider

- Debtor Finance
- Asset finance (leasing)
- Angel / investor finance
- Grants

[FishBowl]

Thank you for your advice. I have passed it on to Marcela. It must be very difficult starting out and finding yourself struggling so early on.

[Joe Micheal]

I'd suggest you to visit online.businesslink.gov.uk, in search option type Start-up finance. You'll find helpful related results.

Further, joining trusted online business site like servana could be a better option. This enables you to accommodate business inquiries from local/international clients and companies. That's ultimately increases your cash flow i.e. more finance no debt burden. My signature could be helpful.

[casssimplyb]

I've just tweeted about an article on the Welovebusinessblog.
Banks are still very reluctant to lend money for a startup so take care of your business plan and consider lending from alternative sources.

[AdamW]

You could take a look at Fubra as they like to invest in people and are readily looking at the moment to burn some bucks on startups.

[writecombination]

A recent survey of small businesses by a commercial finance broker made it clear that getting access to funds was big issue for UK firms at the moment.

It's particularly difficult for start ups. Lack of cash is cited as a frequent problem by the businesses that I profile on my business blog.

If I had a business proposition that I truly believed in and which needed capital, the first place I'd go for funding is friends and family. You're more likely to persuade them to part with some cash, but they need to be realistic about the risks. If you're looking for a few hundreds or even a couple of thousand this could work.

It all comes back to that first reply - if you're not able to invest anything yourself, why should anyone else? Find a way to generate some cash for yourself.