Business loan with bad credit???

Dwhitwam

Hi,
I'm looking for a business loan for £15000,
Its to open a play gym and cafe,
The funds are for a start to purchase everything required.
I'm struggling to find lenders as I have a bad credit rating,
Any advice??
All advice would be extremely welcome!!!
Thanks

AbsCaveDave

Hi, Where have you tried so far? All high street lenders? Have you had previous experience running this or a similar business? My partner does not have the greatest credit but they saw her buisiness side of things was going strong and arranged a loan based on the business, this was via Lloyds TSB. Duncan Banntyne once said, if you've never been in debt, you are not taking enough risks.. not sure how much I agree with him! lol

Brock_and_Roll

Even if you had perfect credit you would have very little chance.

The reason is you are putting nothing in yourself and offering nothing in the way of security. The bank would expect a substantial financial investment from yourself - otherwise you could just decide after 2 months that it was not for you and they would be left with a £15k write off.

zxspeccy

It is worth asking your own bank first (the one where you hold your main personal account), but £15,000 is quite a lot and I am assuming you are looking for unsecured borrowing.

To improve you chances you would need a robust business plan, cash flow forecast (with relevant market research to back up your figures) and ideally some sort of monetary investment of your own. Banks don’t like taking 100% of the risk for new start ups and expect the business owner to take on some of the risk themselves.

Is this a new business, existing business or franchise? An existing business will have historical accounts which may help the bank make a decision. The bank would also like details of your experience in the actual business sector, as a lot of small businesses are built on the experience/skills of the owner.

I would need a lot more info to make a better informed decision, however if you own bank decline you I would say it is very unlikely that any other lender would be interested.

Dwhitwam

So what sort of a % would the banks etc be looking for?
I've tried the main banks and my own but it was a simple no.
I work self employed in the construction industry at the moment but work at a play gym for several years previously.
The turn over and profit on the place was very good.
I have done research in the place I intend on opening which doesn't have anything Simlar for miles around.
I've done a phoney ad campaign there to check out interest and have been to all local children's places to speak with parents etc and get there feedback.
The response was immense, and would be a fantastic venture but need this capital!!!!
It's now getting very frustrating and don't know which way to go!
Is there any government funding available - again after looking at few websites etc I can't seem to find out whether or not I qualify!
People are asking for money up front which I am not willing to pay out!
Having a very detailed business plan would improve chances and maybe get a 100% loan?
Thanks for the responses so far!

Loft_Boy

As others have said the Bank will not lend money with 0% input from yourself. Essentially the Banks will see it as owning more of the business than yourself. If you decide that it isn't working then they are essentially left to pick up the pieces. They will also think that if there is no liability on your part then where is the incentive for you work hard to make it work.

You say that people want money upfront but you're not willing to pay it. This again isn't going to make the Bank want to assist.

In terms of getting a business plan and more information Business Link is probably as good a place to start as anywhere else as they will be able to point you in the right direction. They may be able to point you in the direction of a business angel perhaps (think Dragon Den type set up) but again without any investment from yourself it will probably be nigh on impossible to gt any investment. They would also be able to assist in putting a proper business plan in place.

If you are serious about raising the £15k, I would imagine you will have to get 50% at least in order to secure the rest of the funding. Do you have any Savings / investments you could cash in? Downgrade your car? See if family may be interested for a % in the business etc.

Also is the £15,000 for the purchase of the existing business and if so what do you get for that. Other things to consider in a business of this nature is Insurances, rates and potential staff costs, this may mean that the money you require is perhaps more than £15,000 and in order to be able to meet commitments from Day One you would actually require more.

Sorry it's not probably what you want to hear, but it's probably pretty much the reality of the situation

DCFC79

Dwhitwam wrote: »

The response was immense, and would be a fantastic venture but need this capital!!!! The response may have been immense but depends on how much you would charge, if the pricing is too high then put people off and if pricing is too low then you wont make as much profit.

It's now getting very frustrating and don't know which way to go!
Is there any government funding available - again after looking at few websites etc I can't seem to find out whether or not I qualify!
People are asking for money up front which I am not willing to pay out!

Well you need to put someof your own collateral towards it, would you lend to someone who didnt do this.
Having a very detailed business plan would improve chances and maybe get a 100% loan?
Thanks for the responses so far!

Create a business plan would be a start.

bargainbetty

Do you have any experience at running a business? Especially one like this? Perhaps a sensible move would be to obtain managerial employment at a similar organisation to gain the experience of the business type and model rather than just see it from an employee perspective and to see what the pitfalls are and how to work around them.

Lots of people have great business ideas and wonderful skills. Lots of them go bust because they didn't realise the implications of running a business.

Will you do the accounts yourself, or will you pay an accountant?
Will you be a registered company or a sole trader? If registered, have you registered it?
Companies House will need annual filings - can you do them?
Will you have depreciable assets or just cash turnover?
Maintenance costs?
Insurance - employer, public liability and contents?
Health and safety training?
What will your staff levels be? Will they be ECRB checked? That could take time to get people in. What will you do in the meantime?
Who will do your payroll?
Are you registered with HMRC as an employer yet?
Will you go for VAT registration immediately or wait till you hit the threshold?

You need to have answers for everything. I have seen brilliant concepts go down the pan for want of a good administrator, and half-baked plans work out because the person got the contracts right from the word go.

Build your business plan, and start saving. You need to put up a goodly chunk of this cash and be able to show where the money to pay the rest back is coming from, or you are likely to find people aren't interested.

Offering shares to family for start up cash is dangerous. They need to understand that the shares mean they might not get paid back until the business is in firm profit. That could be a few years.

Good luck

AbsCaveDave

Sorry I should have pointed out my partner had already invested the same as the capital that they were requesting from the bank. Betty is 100% spot on too- as a manager they will want to see comprehensive training and development plans in place too. The bank need a buisiness that will grow, so its WORTH doing business with you.

Apples2

£15k doesn't sound much for a start up.

Would you remortgage your house to the hilt and risk losing it if this venture failed, are you that confident it will succeed?

Lenders will join you if you can convince them there is no way on Earth it will fail, and you will bet your home on it.
If you won't, neither will they, it's practically impossible to shift ALL the risk onto a thrid party lender whilst taking zero risk yourself.

DomRavioli

Have you also considered whether you need to be Ofsted registered, as this isn't cheap. You need specialist qualifications to run a childcare service (unless parents stay on site 100% of the time), as well as registration fees, and takes on average 26 weeks from application to registration being granted (thats half a year).