New Business - Finance question

Hughesy84

Wonder if anyone can point me in the right direction?

Im looking at setting up a company – of which I shouldn’t need any money to, set it up.

Once the company is up and running however then I will need a constant financial funding stream – where do I go to get something like that?

The business which im setting up will offer finance to people, for a high rate of lending, but obviously the returns for the company should be quite high. Therefore paying it back isn’t a problem, but the length of time to which id pay it back would vary for each client (From 1-60 days)

I know Wonga are backed by a wealthy Tory – but do any banks offer this sort of facility if your business plan is solid?

Or would my best bet to borrow from peer to peer type sites? Or perhaps a financial Angel?

Any advice appreciated

InsideInsurance

Given the negative press around these types of operations I would be surprised if you'd get any high street bank offering finance for it.

What sort of monies are you looking for? How are you going to be different from Wonga, QuickQuid etc? Is there the option for you to be an intermediary rather than the actual lender? Something similar to an MGA in insurance speak

podperson

I would be surprised if you can get anything from a high street bank. At the moment they are offering very little funding as it is and I'm assuming they would class this kind of business as quite high risk. (You're going to be lending to people with poor credit etc who the banks would refuse to lend to directly as they consider the risk of non-repayment to be too high).

As mentioned above, there are a lot of these kinds of companies out there at the moment. What makes yours different/more investable from the pov of a financial backer?

paddyrg

This is the bottom of the market, so defaults are high, which would make any backer twitchy. How much are we talking here as what you need is probably a one off cash injection not a rolling line of credit - the credit line will roll itself with short term loans.

If you already have a line of borrowers who are good for the cash and who won't use it to pay off another PDL, build some hard figures and look for a backer as opposed to credit line - may be worth say 5 backers with £10k each taking a punt as by the time that is loaned at £400 a time, the early loans are back in.

Annisele

Are you sure you won't need any more to set it up? What about the costs of obtaining a consumer credit license? (And by "costs", I mean all the associated costs - the fee is fairly cheap).

The OFT may also consider such a business "high risk", which means more red tape and potential cost.

Hughesy84

InsideInsurance wrote: »

What sort of monies are you looking for? How are you going to be different from Wonga, QuickQuid etc? Is there the option for you to be an intermediary rather than the actual lender? Something similar to an MGA in insurance speak

The amount is unknown as who knows how quick a website like this could grow?

As a middle man - yes I could do that, and that is another of my options...perhaps as an affiliate scheme or something similar.

The business is very different - its an idea iv had, and something that ISNT done by any other website it seems.

Hughesy84

Annisele wrote: »

Are you sure you won't need any more to set it up? What about the costs of obtaining a consumer credit license? (And by "costs", I mean all the associated costs - the fee is fairly cheap).

Would I need this if another company is the one sorting the finance out?? So im just using a specific company...its up to them to do the lending?

If I did need one of them - how much am I looking at?

Hughesy84

paddyrg wrote: »

How much are we talking here as what you need is probably a one off cash injection not a rolling line of credit - the credit line will roll itself with short term loans.

If you already have a line of borrowers who are good for the cash and who won't use it to pay off another PDL, build some hard figures and look for a backer as opposed to credit line - may be worth say 5 backers with £10k each taking a punt as by the time that is loaned at £400 a time, the early loans are back in.

1st off - they wont be able to use it for that - so it wont be used to simply pay off another loan, and therefore switch the problem around.

In terms of how much - Im not sure how I could even work that out, as once the website goes live, it could be quiet or it could just go mad...

paddyrg

Hughesy84 wrote: »

In terms of how much - Im not sure how I could even work that out, as once the website goes live, it could be quiet or it could just go mad...

Well, have a guess! The problem is that at the moment you have an idea, not a business plan, so won't get access to any money of any sort. If your idea is completely novel, is there anything similar in another sector? If you are not in the PDL sector how about just developing the concept, building a test site, and if it takes off then you'll have no problem getting Wonga or similar as backers TBH.

If borrowers can't pay off an existing loan, then it suggests the loan is for something specific that doesn't include cash. If that is the case, how about doing a deal with Wonga/Hitachi/whoever is appropriate at the risk level where you'll take an introduction commission and just funnel the business to them. You will effectively just be sending them ready-made suckers much like any time you take credit in Curry's

Without any more clues, there isn't a lot more to suggest!

Hughesy84

paddyrg wrote: »

Well, have a guess! The problem is that at the moment you have an idea, not a business plan, so won't get access to any money of any sort. If your idea is completely novel, is there anything similar in another sector? If you are not in the PDL sector how about just developing the concept, building a test site, and if it takes off then you'll have no problem getting Wonga or similar as backers TBH.

how about doing a deal with Wonga/Hitachi/whoever is appropriate at the risk level where you'll take an introduction commission and just funnel the business to them. You will effectively just be sending them ready-made suckers much like any time you take credit in Curry's

The lending/ paying back at a higher rate is obviously a major part of the business – within a short time frame, however the reason for the lending and how it’s done – is completely novel.

Im working on my business plan – hence why im getting advice about anything I need from every source possible.

In terms of projections however, that’s impossible – as how is it possible to say how many people you think will use the service? I could say 1,000 people in the first 12 months, or I could say 10,000 people in the first month – it really would be guess work. How would the test site work? If it gains lots of interest, and I don’t have the cash – then what happens?

Mistral001

As others have said there is a high rate of defauletrs in these type of operations. What is the plan for dealing with your first defaulter? Have you looked at what rate you get for selling a debt? Have you consulted debt collectors and bailiffs to see what rates they charge for collecting?