New start finance
I thought it was time to shed some much needed light on sourcing finance as a new start business. According to www.startupbritain.co.uk (http://www.startupbritain.co/tracker), this year 161,093 businesses have started trading. And it’s only April.
Today, we received an online application for £40,000, to finance a refit for a new start shop. The client expressed doubt over our ability to raise these sums, based, as is often the case, on their experience of approaching your standard High Street lender.
It needs to be understood, that the high street lenders probably look at these deals somewhat differently than a specialist ‘asset’ broker.
The most important supporting information for a proposal for this type of finance comprises three fundamental points:
1. Have you invested any of your own money into this business? If you have, this demonstrates your potential positive liquidity, and tells the underwriter that you believe in the start up’s success.
2. Are you a homeowner? This provides a source of comfort to the underwriter. It reduces their risk exposure.
3. Does the equipment pay for itself? Cost Benefit Analysis. If you can spend some time calculating the forecast return from the equipment, it tells the underwriter how quickly your income will develop, and to what level. No matter what the asset, you will have a reason for buying it, and this reason is normally...it generates more income. Take some time to measure this, it will serve you well.
In summary, trust in your broker. They will have arranged finance for hundreds, if not thousands, of new start companies. Provide them with your faith, and the information they ask for. Let them do all the hard work!
