Does anyone know about business loans?

Pheno

Hi all,

I'm hoping to start up a business which will require a large business loan. Even with a 75% business loan, I'll still need more cash, so I also will be using money lent by family members which I will pay back as though it was a loan.

The question is, will the providers of the business loan care that I've also taken a large loan with family members? If they will care and will not offer me as big a loan if they find out, is it illegal to not tell them about it?

Thanks for any advice,

Alex

bingbong_3

You do not need to advise them where you get your portion from. In my experience they are not concerned as long as you stump up the required amount to start your business.

I would urge you to be cautious though. Its not the best way to start a business by getting so many loans. Having had a franchise myself which I got by using the 70% loan from the bank I have struggled to make enough money.

Make sure you do a cashflow forecast and remember to take off the profit all of the payments you will have to make to the banks and family every month.

If I was to start another business I would make sure I saved up more in the first place before starting the business. You need to give yourself a fighting chance of making a success of your venture. Also see what grants you can get.

Regards,

BINGBONG

chriz1000

Being quite young myself I don’t yet have my own house. When I was 18 I took out my first business loan, the bank would only lend me £15,000 even though I had a fairly promising business plan.
Now I have a successful business that’s bringing in a healthy profit, I recently went to the bank as I’m wanting to set up a second centre. I played off the previous loan in the first year of operation yet even with a very healthy balance in the account and having previous borrowing experience with them they wouldn’t lend me over £25,000 without security. They said the best other alternative was to sign up for a scheme government did for businesses where I would have to show my business plan to them and they would consider lending me the rest of the money. I cant remember its exact name.
I’ve since found out I’m eligible, but they want me to take out payment protection if I do decide to use the loan.

Just be aware if you don’t have anything to secure the loan on, the bank will most probably be reluctant to lend you as much as you need through your business account.

bingbong_3

chriz1000 was referring to something called the Small Firms Loan Guarantee Scheme. The government affectively act as guarantors for people who have a good business plan but no assets to financially guarantee them such as a house.

Banks like this but generally will not offer you more money. My main point in this is that you should never borrow money so you are upto the hilt in debt. It only takes a few bad paying customers who pay late to screw up your cashflow.

By the way, the Loan Gtee Scheme is good but you pay extra in interest for it. Check out the LGS website which you should find on the DTI website that the government run.

Regards.

leisurely

Make it a Ltd company - convert the family loans into share capital that way they become share holders and your balance sheet will look healthy, they can get dividends out of the business when it is in profit plus they also have an interest in its future - don't mislead the lenders as it will always come back to bite you. Go to the main banks and ask to talk to the small firms loan guarantee managers - you can get a SFLG up to £250k. Visit the governments business help web site and read up on the SFLGS. Also talk to your accountants if you have one - if you don't then find one who will advise you for free and help you put a business plan together and help you get a loan on the proviso that they get the audit and tax affairs of your company!

inmypocketnottheirs

leisurely wrote:

Make it a Ltd company - convert the family loans into share capital that way they become share holders and your balance sheet will look healthy, they can get dividends out of the business when it is in profit plus they also have an interest in its future - don't mislead the lenders as it will always come back to bite you. Go to the main banks and ask to talk to the small firms loan guarantee managers - you can get a SFLG up to £250k. Visit the governments business help web site and read up on the SFLGS. Also talk to your accountants if you have one - if you don't then find one who will advise you for free and help you put a business plan together and help you get a loan on the proviso that they get the audit and tax affairs of your company!

Good sound solid advice.

Pheno

Thanks for your help everyone.

leisurely> I did think about offering a share of the business, but I couldn't work out what was a sensible proportion to offer. Are there any rules of thumb at all?

By the way, the business is a care home so the vast majority of the money I need to borrow will go on premesis. I'm not sure if this changes anything?