Money for starting a business
Posted by admin on 25 April, 2009 under Business advice, Business cash flow and planning, Businesses in Trouble, Cash flow problems, Credit crunch, Looking to buy a business | 
10 Comments to Read
Getting the money for starting a business is a stumbling block that many budding entrepreneurs face at the out set.
The first question to answer is should I buy a business or set up a business from scratch with each route having its own complications from a fund raising perspective. If you are starting out from scratch you have the added problem that you have no track-record in business and the business itself will have not trading history.
However, if you are looking to buy a business or perhaps set up a franchise then this is a slightly different proposition in that and existing business will have a trading history and franchise are liked by banks because they are a know quantity. You do still have the slight problem that you have no business track record, but this can be overcome with a sound business proposal.
There are many ways to find finance using No Money Down principles and in addition to this there is also the Enterprise Finance Guarantee (EFG) (Formerly the Government Small Firms Loan Guarantee Scheme, SFLG) to secure any loans, where you don’t have any of your own security. However, the proposal must be robust that would get a loan from a bank except for the lack of security. The EFG is for small businesses with a turnover of less than £25 million in the last 12 months and can be for existing businesses as well as start up ones, so long as they start to trade in the near future.
For a list of the banks that lend using the EFG you can visit the BERR – The Governments Department for Business Enterprise & Regulatory Reform.
The EFG will guarantee loans of between £1,000 and £1,000,000 and will only provide security for 75% of the loan and comes with a 2% premium payable to the BERR on the balance of the loan on a reducing balance basis. However, this premium has been reduced to 1.5% of the loan outstanding for 2009. EFG loans can be used to replace existing overdraft facilities or provide new finance for working capital, equipment and business expansion, with a minimum term of three months and a maximum of ten years.
Click here for a list of EFG restrictions
Kathy said,
Thanks for a nice and informative site. Somehow I was drawn to reading the post and I enjoyed a lot. Have a nice day!
How to start a small business | in business blog for successful entrepreneurs said,
[...] – Decide on whether to should I buy a business or set up a business from scratch or even buy a franchise business. There are relative merits of each route, as discuss in the article link here. A franchise is a good route to take where you are seeking banking finance, as banks like franchises. [...]
george keywood said,
hello i wanted to no how old u have to be to start a buisness and borrow this kind of money say £400,000 thanks
admin said,
This will depend on the country you are in and I think you have to be over 18 to borrow in the UK not sure about America or other places in the world. To borrow any amount of money and especially this amount George you would need to have a very good business proposition and you will find that unless you are putting up some of your own money and the loan is secure you will not be able to borow this sort of sum from the high street banks. You might be able to get an investor or venture capitalist on board or a specialist bank, but the business idea must stack up and be a very good one – hope this helps, if you want to ask any further questions please do so, Russell
company formation UK said,
If you do decide to set up a business from scratch, it is important your business plan is as robust as possible to secure funding from most banks.
It is important you do your research into the market and you take into account all of the costs associated with setting up your business.
Debbie said,
My husband and I are interested in buying a cafein uk that is already established and includes all furniture fittings etc We are unsure of the best way to begin to raise the finances needed to buy the cafe and the steps needed.(approx £155k)can you offer any advice?
Adam Shaw said,
Hi,
Myself and my other half have 30 years hospitality experience between us and would like to buy a fair sized B&B, around £300,000 – £400,000. If we have a deposit of only £15,000 – £20,000 and nothing to secure against, is there any way of raising the money just using our business plan and deposit (eg the EFG loans mentioned earlier)? We’ve not found the business yet, but would be looking to achieve an annual turnover of around £100,000.
Thanks for any help you can provide.
admin said,
Hi Adam – thank you for the question, apologies for a delayed response. You will have a problem with buying a business of that size with such a low deposit, even if you were able to get EFG approval. If you are looking to invest in a B & B there will be security for the loan (So EFG will likely be ruled out any way), but most banks will only lend commercially up to around 70% LTV (Loan to Value). So in your case you would likely need £90k with the £300k business. Can I ask why a B & B?
admin said,
Hi Debbie – I have sent you a personal email to see what help I can provide for your business purchase
Adam Shaw said,
Hi,
Thanks for the response. A B&B because we’ve always been in hospitality. We now have a little boy so we’re looking for something that’s easier to run than our current pub/restaurant/B&B allowing us more time to spend with him.
We’re still fairly young so we’ll need a decent sized B&B to make an adequate income, but if we have to carry on up the ladder for the next 5-10 years then we’re able to do that too.
We’ll get there, it just might take a bit more time and saving!
Thanks for your help though.
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