Small business loan question

Fliss_M

I am wanting to start a small business. A wedding dress shop to be exact. Now while getting my ideas and costs together I thought it would take me 10 years to get it off the ground. I need to save my own money and pay my loans off first. (As seen below) tho of that total anycredit check can only see 5.4k plus the mortgage.

Heres the thing. I went to harrogate on monday and spoke to a business consultant. I came away shocked that Lloyds are offering new small business loans, unsecured up to 100k (I need 40k to start) which could mean I could be up and running by next sept!

Now dont get me wrong, am not running into anything yet. On the train home something that she said worried me. I work in accounts and as far as I know no business loan is bankrupt proof. Unsecured or not. But those were her words not mine, claiming this offer is backed by the government so if I fail the bank can get their money from them. Oh and that I can stretch this loan over 10 years.

Thats all the details I have right now as she said she was getting the full details in a few weeks from lloyds. (says she got this from a ceminar the other week)

Please be aware, I havent paid this woman any money and I dont intend too, for now all I want are loan details from her. The service she offers I could get for free so am looking that way at the mo. But this loan has me baffled as to how it works. Am going to email her but has anybody else heard of such a thing or if it would even work the way she describes?

Oh and if it did work that way am I right in thinking my loans and credit cards would need paying in full first? (forget about the house, its in negative equity so no secured stuff there)

Part of me is hoping thats the case as work is dodgy as ever and I have no back up plan for if it folds

Ta

chickmug

I have started off a number of businesses but now retired. I have dealt with sales of many shops some succeeded but some that failed very badly.

First you need to do a comprehensive Cash Flow forecast to see the reality. I am out of touch with Government backed loans but they have offered them on and off over the years. They take a long time to go through and require a great deal of proof from you and often an accountant/finance person.

Do you have any idea the cost with setting up a shop and where will you get the shop? Most are leasehold and most on several years onerous leases. Most landlords would not touch you as a new start up business. Sorry to be negaitive but you need some reality in the thinking?

Fliss_M

I am in touch with reality. Its things like that my aunt will help me with. I am not near the forcast yet (tho could you tell me how I can find out what to expect in sales?) I am trying to find a table or list so I can start with the things that need paying for. I do know the shop I have in mind. Its been empty for a while so hope I can arrange a short term lease and a month or so free for setting up time. We will see but no harm in trying. (its 4k pa and 1.8pa rates if that helps for 750m space on 2 floors split even. A stones throw from the centre and theres only 1 other shop in the town which doesnt stock what I plan to stock) Do please give me ideas and point out problems tho. Better I hear them now then when I fall in them

COOLTRIKERCHICK

if i was going to start a wedding dress shops the things i would be looking at or thinking about etc would be

how much profit is there on a wedding dress?

what terms, ie how many dresses must you buy off one designer at a time/ or can you go to a wedding dress wholesaler where you can just get want you want

most wedding dresses have to be altered to fit the bride, would you employ someone to do this? or have someone on a self employed bases?

What happens if the designs you picked, are not the taste of your potential customers?

Would it be best to have a hire option? after the dry cleaning costs etc how much could you make?


How much stock should you carry?

What will i do if things go belly up? meaning how much is at stake, could i lose my home etc

What has happened to previous wedding dress shops in the area over recent years? why did they close?

are there any department stores in the area ? as they now offer cheap bride style dresses etc

how would i repay any loans in the early days, when there is no income? erc

as you can see my list would be endless, and all looking at the negative,

which soooooooooo many people dont look at, they only think that once you open a shop or start a business, you get instant customers/sales.

really nice to see you are doing your home work, but dont let the idea of a government guarentee loan sway your ideas and make you rush into something...

YEOVILGOM

I imagine this is the loan they are talking about:

Enterprise Finance Guarantee

You still need to prove viability before you will get the loan - it is not quite as straightforward as appears to have been suggested!

morgani

Finding out what to expect in sales is a hard and tricky task.

You will mainly looking at one-off purchases rather than returning customers (well you would think anyway).

Some options would be:-

Look at the population in your surrounding area (possible catchment area)
Do some research into the number of weddings
Try to work out what possible market share you might attract
Try then to work out the possible average spend

My knowledge of the retail of bridal gowns etc is very limited but I have been led to believe that old unfashionable styles get severely marked down. So do consider the margins you would expect and the reduced margins you may come to realise.

It may also be worth trying to find a break-even point based on your expected profit margins and the necessary costs of running your business. You can then link this back to the expected volume of sales and average spend.

paulwf

The loan you describe OP is the Enterprise Finance Guarantee. Google it and you should find all the information you need - of course if you need any more info just post here. Applications are made through the banks that deal with it, there is a list but off the top of my head Lloyds and HSBC are two of the main high st lenders.

Fliss_M wrote: »

I do know the shop I have in mind. Its been empty for a while so hope I can arrange a short term lease and a month or so free for setting up time. We will see but no harm in trying. (its 4k pa and 1.8pa rates if that helps for 750m space on 2 floors split even. A stones throw from the centre and theres only 1 other shop in the town which doesnt stock what I plan to stock)

The lack of competition could be seen as a bad thing as well as a good thing. The wedding dress market is a mature market so if there is a lack of competition this might be because there is a lack of demand in that location.

Although you don't need a primary location for your type of shop you do need to be able to project a very "exclusive" (by that I mean upmarket) image. That means location is very important (it doesn't need a high footfall but must be in a posh area) and you need a very good shop frontage and fittings throughout. £4K is a very small rent (even assuming you mean 750ft not 750m), visit some other wedding dress shops and check how their areas compare. Image is going to be everything in your business.

paulwf

If your dream is to open a wedding dress shop then I think it would be best to come up with a long term plan to make it work. There is no point in rushing into it if you could do better with some planning.

The first thing to tackle is the outstanding personal debt. Although it might not exclude you from getting a business loan you really don't want to start a business in debt. There is the old saying that you should only expect to break even in year 1, so you don't want to have to take extra drawings to service personal debt. In the pre-trading phase of a business (which usually lasts nearly a year) you might have to pay for things such as training and professional fees which you need to pay before you are in a position to apply for a loan, do you have the assets to pay for these? Having some personal savings also helps to cover any emergencies, you never know what might crop up to make the business close for a couple of weeks.

I know this is a sensitive topic so I won't delve into it deeply but make sure you are fully on top of the reasons you are in debt. When you have a business the money in the business account doesn't feel your own and there is a huge urge to go on a shopping spree with it. With your business this could be costly as a sale rep persuading you to take 10 gowns might mean you take on £5K of extra stock. So many small businesses over buy then run out of credit, this is something to really be on the ball with.

To plan for the actual business analyse your current skills. Have you worked in retail before? Are you expert in sales techniques so you know how to get customers then increase their spend? Have you managed staff before? Have you managed accounts? You will never be able to cover everything but make a list of the skills required. Perhaps it would be worth working in a wedding dress shop for a year first? Or if that is not possible managing a small business (even in an unrelated field) for a year to gain experience before setting up your own business?

Your type of business is going to be very specialist, you are going to need the contacts to find the best suppliers, and you will need to be an expert at marketing and then at sales. Don't give up and follow your dream but make sure you have a solid foundation first and only then look at setting up your actual business, when that time comes the Business Link courses should be of help.

chickmug

I think you are best to get in to see Business Link and ask their advice. You need so much help a book could be written on what you should do and many on here would not be able to give so much time - perhaps?

http://www.businesslink.gov.uk/bdotg/action/home?tc=000KWBL200230110009&domain=www.businesslink.gov.uk&target=http://www.businesslink.gov.uk/

Fliss_M

Wow some amazing advice here!! My plan originally was to pay that debt off first. then save some. My debt is in part after a long time with no job, trying to keep a house, then a wedding, then mat leave plus a car smash that was my fault on 3rd party fire and theft. It all mounted up. Its all quite old debt. now I have trying to get my DH through his driving test so he can join the RAFP to the mix. Your right, am being swayed. Thank for the business link info. I'll do that. I always thought I would take a loan but for half of what I needed and at a stage when 1 wage could support us. So I will stick with that.

I do need to create a business plan and expenses so I know what I need in start up costs. So I know what to save. I may get this off the ground in 5 years rather then 10 depending on those costs.

The area is a tricky one. With it being 5 years away who knows what can change, but the whole of my town is a little dodgy. lol. Wait for when the time comes mayb. Its the account clerk in me saying go for cheapest rent biggest space.

Skills wise I have accounts and customer service. (morrisons cafe so lots with stroppy hungry customers lol) I will see what corses business link have but other then that I suspect its the deep end for me unless I can get a job in something similar.

Thanks again, this has made me re-focus on what my goal is.

Horace

Business Link are great for courses or you could approach your local chamber of commerce as they will run free business courses too. I went on one last year or rather I did a series of courses: Sales & Marketing, Legal Matters, Accounting, How to set up a business including how to write a business plan.

I also work in the wedding industry but not as a shop - there are quite a few shops by me and some are struggling, even the local couture shop now only opens at weekends because she has a full time job elsewhere. Some wedding shops are going to the wall - as is testament to 4 boxes of assorted bodices, trains (I didnt know I had them in the box) and 4 designer dresses that I picked up cheaply at an auction, now I have the problem in how to shift them (don't say ebay, I hate ebay and anyway ebay isnt good enough for these items):rolleyes:

It is best to be debt free before you go into business - I have managed it on a shoestring but there are times when I struggle so I have to live on baked beans. I also know someone who had her own business but she had a problem - she loved to spend so spend she did by buying flash cars, etc and she lost her business.

There is a good book that I recommend you get from the library by Deborah Meaden (of Dragon's Den) called Common Sense Rules for Business and this book is brilliant as it tells you what others don't eg. you will be living on less than minimum wage for a while etc. etc.