Advice on financing a business start-up

vimhencakk

I'm hoping for some useful advice for this potential project!
My wife and I are contemplating giving up our London life and relocating to run either a B&BV or a tearoom. My wife bakes and sells cakes as a side business, and is keen to get into this in more of a full-time capacity, ideally with her own premises. The perfect solution would be to buy somewhere where we can live and also operate this business. Seeling our current home will give us around £300-350k to invest into buying somewhere new, but beyond this we have no working capital. Obviously we need cash to get whichever business we choose off the ground, as well as paying for a roof over our heads. Is this even feasible with the amount of capital we will have, or do we need a nest egg of some description before we'll even be considered for business financing? Thanks!

[Deleted User]

It will depend on whereabouts in the country you plan to buy or start a business, the s.east and home counties would of course be the most expensive. To get business finance from a bank will need a business plan, but as you have a nice chunk of capital it should be reasonably easy for the right business.

Herzlos

I'd be wary about trying to start a B&B now as a source of income as I suspect they are going to struggle for income for at least another year. That said if they are going bust all over the place you may be able to buy one cheap, assuming you can make enough from the cake business to leave the B&B closed for a while.

inmypocketnottheirs

I started a business Jan 2020 and I didn’t have a problem raising funding. Essentially £45k of my own money, £80k bank loan and £15k overdraft (was £25k but I never went anywhere near and I had it reduced).  I did secure against an unencumbered property. I’m planning on reducing the loan (down to £70k now) by £35k at the end of May.   Business funding is entirely possible based upon a sound business plan, some cash and some security. 

[Deleted User]

You'll probably find cottage rentals are more likely to succeed particularly in the short term - I wouldn't touch a hotel, let alone a B&B, probably until 2022 and I am fit and healthy, however a cottage where no-one else will be in contact with me I will do this year if lockdown is sorted

pjcox2005

Are you able to continue employment after moving (ideally with existing employer) whilst the business is set up mainly by your wife? Just thinking the continued income may take pressure off and then you also open up getting a regular mortgage for new home acquired rather than reinvesting all the capital in a new house. That way the capital not put down for the house purchase can go into the business rather than worrying about business loans.

Guess it depends how much you need and whether you'll be living at the business or not.

maxsteam

You need to be extremely wary as estate agents up and down the country are on the look out for rich Londerners who don't know the price of local property. Your £350k will get you a 3 bed house in London or, for the same price, you could have a couple of businesses in Bridlington ( https://www.rightmove.co.uk/commercial-property-for-sale/property-85754284.html ; https://www.rightmove.co.uk/commercial-property-for-sale/property-83049625.html ) - a BnB for you and a restaurant for the wife.

I cannot see any problems with the finance if you want some. A lender will be happy to see you putting in more than they are and will put a mortgage on the property. So you could even double up and get something for approaching £700k, but then you would be in the position of working for the bank and it's quite disheartening to work hard and then find that each month the bank is making more than you are.

My advice, if you have no experience of employing staff or running a full-time business, is to start small. As I stated, you can easily get a substantial business for half of your savings. It's possible that things will not go smoothly. If you make mistakes, it's better to make a mistake with half your savings than with twice your savings. It's also possible that things will go well in which case you can move up. If you are wanting to give up the stresses of London life, the last thing you want is a huge mortgage.

I mentioned Bridlington because it's not so far from me and property prices are less than in posher locations. You may well prefer something smaller but posher. The point that I was wanting to make is that, yes, it is quite feasible to set up a business with a lot less than £350k and you don't need finance. There will be a lot of change in the hospitality industry as it opens up again. You should not rush into anything. You should certainly spend a few weekends in whichever area takes your fancy before buying property there.

My personal opinion is that short term lets (AirBnB, booking.com, etc.) have better prospects than traditional BnBs. Self-contained short term lets have certainly been doing well recently, often in the same street as hotels that have been asked to close.