Finding an unsecured business loan for £15,000

DreamingJo

Sounds simple doesn't it, but I am having a complete nightmare!

I have an opportunity to buy a small business, that has unbelievable growth potential. I have produced a business plan, and contacted both banks and other lending institutions and a number of companies offering grants in my area. (Sadly, there are no funds available grant wise at the moment, although they will contact me as soon as that changes.)

In total I am seeking £35,000. One bank looked at the plan and said yes, go away find £25,000 through a personal loan, come back and we'll give you the rest and set up a business account. Obvious problem - personal loans can't be used for business purposes!

We have spoken to two other banks who say no, don't go down the personal loan route. One has said if we can find between 30% and 50% then they will look at it, the other has said find £10,000 - £15,000 and they may be able to help.

Now the problem is this - I am a tenant, so no legitimate company seems interested. I was also made bankrupt 5years ago, despite now having a good credit score, that still goes against me. I am also a SAHM, so no income - unless I buy the business. My husband is willing to do this with me, but we both went bankrupt together and although he is in full time work, his credit rating is not as good as mine.

This business is ideal for a SAHM such as myself and is marketed as such. I know the business and owner, I have been a customer since it started. I know the product well and I also know the core customer base. The business is growing rapidly, with opportunities both in this country and abroad. Every lender I have spoken too, thinks it is great, but no-one will lend to me.

Can anyone offer me any advice on where I can find around £15,000, which is what I need if the banks are going to help. I am finding it really difficult to find something that is not a scam. This opportunity will make a real difference to my life as well as my family, I am determined to make it work somehow, but need help in doing so and time is fast running out as I am not the only person interested in this little business!

I would really appreciate and advice or input, I don't know where else to turn and my head hurts!

WHA

Have you asked the seller whether they'd be willing to finance you, either by giving you a loan themselves, or by a sale over time, i.e. you buy in say 20% now, then another 20% in 6 months, and so, on. If they don't actually need the money, then it would probably work for them rather than lose a sale.

koloko

That's good advice.

Tixy

Is this an exisiting business?

What is the £35k going to buy you? If its an exisiting business are you buying a limited company? or the trade and assets from the previous trader?
Why is the current owner selling? Are they retiring? do they need the cash right now? or what?

Does the purchase include any assets - and if so have you considered asset finance?

Obviously you recent bankruptcy is going to make it much more difficult for you than for someone with a good credit history.

Have you searched the business angel network for local business angels?

Do your financial projections demonstrate that the business is able to afford to cover repayments on the whole £35k and provide you with more than a living wage? Or will it only provide to pay you a modest income - ie a lifestyle business?

DCFC79

If its so good as a business why is the owner selling ?

Is he wanting to get out as he wants an easy life ?

rich11

There is a forum called ukbusinessforum.If you post your query there you may find a venture capitalist prepared to help you out

Be aware though they do not tolerate fools so make sure you have the facts and figures and make sure they stack up

Good luck

Apples2

The problem is that you are taking zero risk yourself, the entire risk of this venture will reside with any lenders you may find.

This situation will not sound good to anyone notwithstanding the fact you are both BR's so have already jumped ship once before.

I would think personal investors would be your only option, I can't see any Personal Loan organisations taking this on.

dealer_wins

Chances of getting a business loan or personal loan is ZERO.

Hate to say it but its true.

And most "too good to be true" business opportunities end up being big losers if not outright scams.

DreamingJo

Thank you for your comments. You kind of confirmed to me what I already knew, but I'll try looking at some of the other avenues you mention.

I know I make it sound too good to be true, but really is a very exciting opportunity and the seller has legitimate reasons for selling, despite being told she is crazy to do so by many professionals. I have no doubts about the business or where it is headed. Our projections show that it could pay off a loan of the full amount within 3yrs, by which point I would have a very healthy income!

DCFC79

Let us know what happens.

zxspeccy

A stated before you are asking for the Bank to take 100% of the risk for this venture. If it fails then they will be out of pocket to the tune of up to £35K, if it succeeds then they will get the borrowing paid back (and a bit of interest). From your perspective if it fails then you won’t be out of pocket (although you will have an outstanding debt you will be unable to pay), if it succeeds then your will be quids in. The whole deal is weighted in your favour, and what Banks are looking for is for the risk to be spread. This means they would want you to invest some of your own hard earnt cash into the business, which will give you a bigger incentive to make a success of the venture (as you own money is at risk as well as the banks).

There is also some important questions that would need to be answered as well:

Is the business a franchise?
If it is so successful then why is the present owner selling? (if it was me I would want to hand down such a successful business to a sibling and to keep it in the family)
How did they come up with the valuation of the business?
Is the business a “Keyman or woman” business and if so how will you protect yourself against this?
How many years of accounts have you been given to analyse? and are they audited? also what is the most recent set of accounts telling you?
What value does the Balance Sheet give the business? and how much of that value is physical assets, and how much is tangible?
Have you gone through the contract of sale with a fine toothcomb?
Are there best and worse case scenarios built into your cashflow forecast?
Is you business plan robust?
What business experience do you have in this particular line of work?

Like others on here I don’t think any bank will lend you 100% of the money and certainly not unsecured. Could you not just buy into the business as a partner (lower equity), this will help with the handover (especially the handover of clients) and also provide some much needed training at the outset. Then with your share of the profits you could buy more and more of the business until you own it outright. Of course this would have to be drawn up in the contracts at the outset.

Good luck and keep us updated.