Getting Finance
Where can I get business finance?
Well there are many avenues that one could go down to find business finance but I suppose one of the first that comes to mind are banks and building societies - many of which have turned themselves into banks in recent times. You yourself might have some redundancy money or some savings which you could contribute. One useful thing you could do early on is to get yourself a business starter pack from several local banks or building societies. But you may have done this already when you were preparing your business plan.
Which bank should I approach for a loan?
Well it's often a good idea to open a bank where you have an account at the moment. Because you've established a history of good practice with them. Most banks will open a business account with no charges for possibly the first twelve months.
Can a building society help me in a way a bank can't?
There are a lot of building societies that have turned themselves into banks recently, and so you can approach them in the same way that you would a traditional high street bank. But those that are still building societies, that is they have got their mutual status, will not really be inclined to make business loans because that is not really the nature of their activity.
What type of loan is best?
Well, your accountant will probably advise you to take a short-term loan rather than a longer term one, say about three years. A bank, on the other hand, will probably advise a longer loan, but then, that is their business, after all.
What is meant by collateral?
Collateral is a term that refers to someone or something which backs up your loan and guarantees that the lender will get their money back in full, regardless of what happens to you as a result.
What could I use as collateral to secure a loan?
You could use your house as collateral to secure a loan, but only as a last resort, and not without considerable thought and advice from your accountant. For oenething, you'd need to think about the impact not only on yourself but on other members of your household. Should things go wrong, you suddenly find yourself and your family without a roof over your head.
If one bank refuses to help, should I try another?
Yes, yes by all means shop around for banks. But it is wise to do a little research perhaps before approaching another bank. Don't just go to the local branch because it's the nearest because banks sometimes specialize in particular areas. Have a word with someone in a similar business to you and see what bank they would recommend that would perhaps look kindly upon your business. A preliminary chat to see whether the bank would be willing to lend you any money at all could be worthwhile. It could save you time, if the answer's a definite no, well at least you know where you stand.
What is venture capital?
Venture capital is what people invest in your business and in return they take a stake in your business. And this can sometimes be quite a high percentage.
Should I apply for venture capital?
At this stage I would say no. Applying for venture capital is not a usual route to take, and you would need to have some very sound reasons before embarking on it, and certainly not without good thought and discussion on it with your accountant. Although it might be a last resort if you were an inventor.
What are the benefits of having an investor?
First of all this would only apply if you were a limited company. An investor might bring you the benefit of having experience with your type of business, which could be of help to you. But this investor, by the fact that they are investing money in your business means that they become a shareholder and as such become entitled to some of the profits of the business.
What are the drawbacks of having an investor?
Well, not only the might investors wants a say in the running of the business, they might be asking for an unreasonable return on the investment. So in a nutshell, I would say approach with care.
Is it risky to remortgage my house to finance my business?
Is it risky to remortgage your house? Well the short answer is yes. And the best advice is, don't do it. But the practical answer is look for some other way, there has to be some other way. It might be adjusting your thoughts about your business. Perhaps getting it off the ground in a more modest way. Perhaps concentrating on one part of the business to start with and then expanding, little by little, as circumstances allow.
