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
Hi Phil – I did send you an email on your question, but to help initially you could split the purchase price between how much you pay up-front and how you pay over time, which is called a vendor loan. This will partly help your funding dilema. However, the vendor will of course need to agree to this request and assuming they do then you will need to raise the balance somehow. My No Money Down book, which is a link in the above article might give you some more ideas too.
Hi there, Myself and partner have both worked in Catering Industry for 10 years plus and have decided its time we worked for ourselves, We have found a business (cafe) for sale in our home town and need to find £45k to buy it, we have no security to put down on it and need help to find out how we can do this, can anyone help?
Hi,
I’m 26 Me and my partner have a about £20,000 of debt and no money behind us. I want to borrow £1000,000 to remove our debts buy a zoo and have some capital left to spend on the zoo afterwords.
I am crazy but I’m not a fool. I completely understand how it sounds but please indulge me. How could I possibly go about raising or borrowing these kind of funds?
I have done plenty of research to ascertain the zoo’s current profits and earning potential. I already have what I believe to be a good business plan complete with some marketing strategies. and I think I possess sufficient evidence to prove that it could be a worth while loan/investment despite the obvious risks.
any advice would be greatly received
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.
Hi Debbie – I have sent you a personal email to see what help I can provide for your business purchase
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?
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.
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?
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.
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
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
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