Investing £100k into a business

[rich12]

Hi,

Not 100% sure whether this can be answered without knowing all the details but i'll try..

We have been looking for some investment into our business to help cash flow and buy more stock. Somebody me and my business partner know is in a position to invest £100k (maybe more) into our business.

He has asked us to come back to him with a proposal. I know roughly what sort of profits we could make make from the extra capital but am unsure of what realistically is a good ROI for him.

Obviously we want him to invest his money with us but don't want to be taking the piss with his return nor do we want to be giving money away that could be kept in the business.

So if anybody can, what sort of figure or percentage would be good for investing £100k (low ish risk as the stock can always be sold at trade value)

Thanks

[trickywoo]

Is it an investment or a loan?

Does he specifically want a share of the business in return or does he want his £100k back plus interest?

Can't you borrow the money yourselves i.e. max out credit cards / personal loans / or simply sell something to generate the cash?

This will almost certainly be the cheapest option. I'm guessing the bank won't lend the business directly.

The lender will assume you can't get the cash elsewhere and jack up the interest. I'd not want to give away shares as once they are gone they won't be cheap / easy to get back. The prospective lender will probably ask for a good sized chunk.

[rich12]

Hi,

Investment back plus interest. (sorry, should have been clearer) He has no interest in buying shares etc.

We have only been trading 8 months so banks etc are a no go..
We are not trying to raise the money as we need it. It's because we are wanting to expand further (more stock etc)

Edited by rich12 on Thursday 4th June 16:56

[Centurion07]

At the very least he'll be wanting to beat any interest rate he can get by leaving it in a bank account, then a bit more on top of that because however good your business is, it's still riskier than a bank account. Plus, you need to factor in how much help his money will be, long-term, for YOUR business i.e. if you can't get that money from a bank loan at x%, then you have to give him a bit extra on top of what I've already mentioned if it means your company can expand. That's how I would approach it anyway.

[Wilmslowboy]

I've lent money to businesses, both in return for equity or simple interest.

One recent one was a similar situation, trading for a couple years...to buy stock etc...(low risk supposedly) it was at 12% flat (1% a month, plus tiny amount for some legals) - The business went bust lost the lot (now trading again very successfully without any debt).

A business that has only being trading 8 months - I would want to see 18% (less if the directors were able to give PGs, or payment guaranteed against customer invoices).


If you really believe in your business, re-mortgage (c4%), if putting your home at risk feels too risky then think about how low risk it really is.

A lot of it is also going to come down to timing...how long do you need/want the money ??
Will selling more this year naturally mean your business becomes more valuable longer term also could mean it is easier for you to raise lower cost funding in the future....

[rich12]

Thanks for the replies.

Remortgaging my house is a big no as i'm hoping to move beginning of next year but just to be clear, if I was in that position, I 100% would.

The other points you have mentioned, I will be looking into and seeing what's what ASAP.

Thanks

[Aquarius909]

If you're a home owner with equity (let's say less than 75% LTV) then there are lenders out there who will lend to you based just on a Personal Guarantee i.e. no charge on your property required - mind you, the max they will lend is less than you are looking for and typically in the £25-50k range. For your reference though their rates expressed as a yield is circa 20% (i.e. a flat or simple rate of interest of approx 10-11 based on a 5 year loan

With this in mind I would say he would be expecting circa 10-12% on simple interest or 18-20% as a yield for an unsecured loan (as I would expect a "mate" to lend at a slightly better rate than commercial terms).

Hope this helps.

[rich12]

It does, thank you.

Still in the early stages so just after advice which so far has been great!!

[DSLiverpool]

There is lots of European fund money about, it varies on where you are but here its the North West fund and they HAVE to lend it out. No primary charge and no real hassle.

[toohangry]

Have you looked at Funding Circle?

[trowelhead]

You could go to assetz capital - they would probably charge about 12% if accepted, but you would need to sign personal guarantee / back the loan with your home/other assets

Unsecured, surely you would be looking at 20% upwards - massive risk to any lender / investor