Discussion
Hopefully the ph collective can tell me whether what my old man has been told is tosh or not.
He has a company that has been going for a couple of years, has grown, now has premesis and an employee.
The company has a reasonably full order book and quite a few large orders that it has been told verbally it has and is expecting the paperwork in the next month or so.
All well and good so far however the company has a major cash flow issue and really needs some outside cash put in, his bank account manager has introduced him to somebody who arranges meetings between VC's and Businesses.
He had the meeting and he tells me it went well and lasted for several hours, the chap told him that he would normally take 5 - 10k as his 'cut' this seems fair enough if he is succesful. However this is to be paid up front, bearing in mind the cash flow problem blowing 5 - 10k he really doesn't have on something that may not work does seem a bit foolish.
When he pointed this out he was told it could be paid in instalments, he is still thinking about it. Is this what would normally happen?
He is a very good salesman but is not so great at the accounts side of things and really needs a financial accounts type of person to be running that side which would free him up to make more sales and cover that cost but doesn't have the cash to pay them in the meantime.
What do you think?
He has a company that has been going for a couple of years, has grown, now has premesis and an employee.
The company has a reasonably full order book and quite a few large orders that it has been told verbally it has and is expecting the paperwork in the next month or so.
All well and good so far however the company has a major cash flow issue and really needs some outside cash put in, his bank account manager has introduced him to somebody who arranges meetings between VC's and Businesses.
He had the meeting and he tells me it went well and lasted for several hours, the chap told him that he would normally take 5 - 10k as his 'cut' this seems fair enough if he is succesful. However this is to be paid up front, bearing in mind the cash flow problem blowing 5 - 10k he really doesn't have on something that may not work does seem a bit foolish.
When he pointed this out he was told it could be paid in instalments, he is still thinking about it. Is this what would normally happen?
He is a very good salesman but is not so great at the accounts side of things and really needs a financial accounts type of person to be running that side which would free him up to make more sales and cover that cost but doesn't have the cash to pay them in the meantime.
What do you think?
I've spoken to a number of VC's in the past, all of them have offered their services for a cut of the cash raised. I have never been asked for cash up front. I think Screbbe might be able to shed a bit more light on this one..
If it is pure cashflow can he not either take a loan or put in a factoring facility? Fair enough either will cost him cash but unlike using a vc he will retain all of his ownership, the other reasons I have never used VC funding is that they have always wanted too much of the business (although there is always the 5% of an elephant Vs 100% of an ant argument).
Sorry I think I have just confused the matter a bit
D
If it is pure cashflow can he not either take a loan or put in a factoring facility? Fair enough either will cost him cash but unlike using a vc he will retain all of his ownership, the other reasons I have never used VC funding is that they have always wanted too much of the business (although there is always the 5% of an elephant Vs 100% of an ant argument).
Sorry I think I have just confused the matter a bit
D
If it was me i would wait until i have the written order and see bank manager again for an overdraught facility if he won't i'd go elsewhere. The order itself is like money in the bank to most bank managers sounds like yours ain't that helpfull and i would be wondering why he is passing you on to outsiders.
magicofmotors said:
If it was me i would wait until i have the written order and see bank manager again for an overdraught facility if he won't i'd go elsewhere. The order itself is like money in the bank to most bank managers sounds like yours ain't that helpfull and i would be wondering why he is passing you on to outsiders.
Agree with the idea of funding this through a loan rather than VC but I would approach the bank on the basis of a structured loan rather than an overdraft. O/D's can be called in at a moments notice and that can kill a business stone dead. With a structured loan you can be sure that as long as you meet the payments you are not going to be asked to repay the entire loan with no warning
billsnemesis said:
magicofmotors said:
If it was me i would wait until i have the written order and see bank manager again for an overdraught facility if he won't i'd go elsewhere. The order itself is like money in the bank to most bank managers sounds like yours ain't that helpfull and i would be wondering why he is passing you on to outsiders.
Agree with the idea of funding this through a loan rather than VC but I would approach the bank on the basis of a structured loan rather than an overdraft. O/D's can be called in at a moments notice and that can kill a business stone dead. With a structured loan you can be sure that as long as you meet the payments you are not going to be asked to repay the entire loan with no warning
This would have been his prefered option as well, however they are only interested if he is going to secure it on his house and because he rents that is not an option he has.
The company has a 10k overdraft and to be brutally frank he doesn't have the cash to pay that off in order to go to another bank.
He did apply for the small business loan guarantee however the bank turned it down (although he later found out that this was their standard response)
To a degree it isn't just the money he is after what he needs is somebody who can give a bit of guidance from an accounts point of view as well almost like a retired FD who wants to work 1 morning a week and can introduce him to more of the right contacts (he is quite well known in his field anyway and in reality does very little advertising most of the business is word of mouth)
A major part of the problem is that because there is not the money to pay for more people and vans the jobs are taking longer, because they take too long to do he makes less profit on them and because he makes less profit on them he doesn't have the money to take on more People and Vans.
He had a customer go bust on him about a year or so ago oweing about 15k coupled with a large job that took a lot longer to finish than was expected and so consequently didn't make virtually any profit on it Really he hasn't managed to recover from the 15k which he has been struggling to make back - he has a fantastic business that needs a bit of a cash injection and it can soar.
The Bank aren't keen and he can't really move until he has paid off the O/D.
I am surprised you would normally pay up front what sort of figure are you talking about?
I assume he is looking for less than £50k ?? in which case a fee of £10k to £15k seems very high ???
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