Borrowing to expand
Discussion
Hello!
So just after some business advice, as a company we have borrowed before but I’m looking to really push the business in 2019 and would really like to borrow a much larger amount of money to do this.
So a little background we make a conservative amount of money year on year for past 7 years and we out right own a unit worth over 1m
Would a bank happily lend against a secured property such as this or is the best way to borrow to re mortgage the unit. What sort of % of value would a lender lend to? Ideally after working out all figures we would like to borrow up to 500k over 5 years
The unit is also in another company name which I am director and shareholder of so I would guess they could still use it to lend against?
Sorry for the novice questions, I’m just looking at ways to push the business forward. And borrowing is something I now only a little about
Thanks in advance
So just after some business advice, as a company we have borrowed before but I’m looking to really push the business in 2019 and would really like to borrow a much larger amount of money to do this.
So a little background we make a conservative amount of money year on year for past 7 years and we out right own a unit worth over 1m
Would a bank happily lend against a secured property such as this or is the best way to borrow to re mortgage the unit. What sort of % of value would a lender lend to? Ideally after working out all figures we would like to borrow up to 500k over 5 years
The unit is also in another company name which I am director and shareholder of so I would guess they could still use it to lend against?
Sorry for the novice questions, I’m just looking at ways to push the business forward. And borrowing is something I now only a little about
Thanks in advance
We have used this but it’s only over short term and equates to 10% turnover so it’s noticeable to cash flow.
amazon lending is very much the same.
We would like to borrow over a longer period as the money will be used in a way where the return wouldn’t be so instant. PayPal and amazon are great for quick stock purchases etc.
amazon lending is very much the same.
We would like to borrow over a longer period as the money will be used in a way where the return wouldn’t be so instant. PayPal and amazon are great for quick stock purchases etc.
Really! I had a lot of hate on here a few years back I think 🤔
I wouldn’t say I’m doing well. I know where I could be and seems I’m gunna have to borrow large to get there. online retail is sooooooooo competitive. we have strongly invested in devloping our own brands and this is where I see the business needing more capital otherwise we run the risk of getting beaten to market on product we have in development.
I wouldn’t say I’m doing well. I know where I could be and seems I’m gunna have to borrow large to get there. online retail is sooooooooo competitive. we have strongly invested in devloping our own brands and this is where I see the business needing more capital otherwise we run the risk of getting beaten to market on product we have in development.
chowiekid said:
Really! I had a lot of hate on here a few years back I think ??
I think (From memory) quite a few took some of your sales claims with a pinch of salt, they couldn't understand how you could physically process so many online orders in a day as a small start up business.
I will pm when I’m back in the office tomorrow!
I guess I did come across like a little knob tho!
I must apologies for my original behaviour! Things were defiantly not as easy as I first imagined and I guess my nievity didn’t realise some of the specialist help you can get off these forums.
Over the years I have still always come back here and even without posting found some topics extremely helpful with growth.
Thanks once more for the help so far!
I guess I did come across like a little knob tho!
I must apologies for my original behaviour! Things were defiantly not as easy as I first imagined and I guess my nievity didn’t realise some of the specialist help you can get off these forums.
Over the years I have still always come back here and even without posting found some topics extremely helpful with growth.
Thanks once more for the help so far!
Is 2019 the year to be borrowing money? I don't know about you but there are too many unknowns with Brexit for me to risk any sort of financial expansion of my businesses.
Perhaps with a business that has a 100% UK supply chain but for anything else I would be cutting costs not increasing them in the short to medium term.
One of these days politicians might realise that the wrong decision in a timely manner is better for business than dithering about with no decision.
Perhaps with a business that has a 100% UK supply chain but for anything else I would be cutting costs not increasing them in the short to medium term.
One of these days politicians might realise that the wrong decision in a timely manner is better for business than dithering about with no decision.
With regard to taking VC cash I have this example I was aware of.
———-
Built a business to £8m with small debt
Wanted to expand worldwide and acquire bolt on businesses
Took VC support funding they put a FD in the company.
That was March, bought 1st biz May, expanded NZ Aus Immediatekt, USA planned.
September the VC company had issues.
October he left the business
2 years later the entire business failed.
——
Beware getting others involved.
———-
Built a business to £8m with small debt
Wanted to expand worldwide and acquire bolt on businesses
Took VC support funding they put a FD in the company.
That was March, bought 1st biz May, expanded NZ Aus Immediatekt, USA planned.
September the VC company had issues.
October he left the business
2 years later the entire business failed.
——
Beware getting others involved.
Edited by DSLiverpool on Thursday 27th December 12:03
Fascinating to read.
I’m in the almost exact same position.
Business properties owned outright, similar value to yours and considerable stock.
Own brand that has consumed an enormous amount of capital as we have grown but online so competitive that I see own brand as the only solution long term.
I approached a lender last year for £150k or so to buy a new unit because we were spending £1.2k a month on pallet overspill storage that wouldn’t fit our premises. Our own bank (trading with them for 30 years without an overdraft or loan facility) wouldn’t lend us the money (even secured against almost £1m of owned buildings in the business) because they were concerned about “affordability”. I pointed out that the loan for the building would cost less than the storage we were already paying... blank stare. (This was RBS)
So I asked another bank (Santander) and they immediately said yes how much do you want!
Then I tried Funding Circle who were also falling over themselves to lend us the money. Rate was good but there was a fee (their margin) to watch out for.
In the end the warehouse I had lined up (that was silly cheap to be fair) was taken off the market and I’ve sat it out ever since. I still have the same issue - risk of brand stagnation, more and more inventory, more money in China and now having to consider storing my inventory in Italy (my biggest market) because of Brexit. I’ve already applied for VAT numbers in 6 other countries to assist with storage/distribution stuff.
I’m in the almost exact same position.
Business properties owned outright, similar value to yours and considerable stock.
Own brand that has consumed an enormous amount of capital as we have grown but online so competitive that I see own brand as the only solution long term.
I approached a lender last year for £150k or so to buy a new unit because we were spending £1.2k a month on pallet overspill storage that wouldn’t fit our premises. Our own bank (trading with them for 30 years without an overdraft or loan facility) wouldn’t lend us the money (even secured against almost £1m of owned buildings in the business) because they were concerned about “affordability”. I pointed out that the loan for the building would cost less than the storage we were already paying... blank stare. (This was RBS)
So I asked another bank (Santander) and they immediately said yes how much do you want!
Then I tried Funding Circle who were also falling over themselves to lend us the money. Rate was good but there was a fee (their margin) to watch out for.
In the end the warehouse I had lined up (that was silly cheap to be fair) was taken off the market and I’ve sat it out ever since. I still have the same issue - risk of brand stagnation, more and more inventory, more money in China and now having to consider storing my inventory in Italy (my biggest market) because of Brexit. I’ve already applied for VAT numbers in 6 other countries to assist with storage/distribution stuff.
NDA said:
What is the current size of your business? Turnover/Profit?
Have you written a business plan that covers how the business will grow post £500k cash injection?
Would you consider offering equity for an investor? You could reduce this equity as you achieve your business plan objectives.
I love having the complete control of the company an Investor is something that isnt that appealing to me unless they are going to bring some skills to the table the company is missing or needs.Have you written a business plan that covers how the business will grow post £500k cash injection?
Would you consider offering equity for an investor? You could reduce this equity as you achieve your business plan objectives.
Also the asset im looking to borrow against isnt owned by the company but personally which is already making it tougher to borrow.
We have planned moving forward and the 4 - 500k would allow for us to get to a level where the company should be able to self finance expansion, providing all goes ok, (i guess you cant predict this, i know the market im in very well and always work things out on a worst case scenario to be safe)
Turn over is around 2.8 with a net figure of around 5% these figures are also causing me some issue currently with lenders.
Cheers
Julian Thompson said:
Fascinating to read.
I’m in the almost exact same position.
Business properties owned outright, similar value to yours and considerable stock.
Own brand that has consumed an enormous amount of capital as we have grown but online so competitive that I see own brand as the only solution long term.
I approached a lender last year for £150k or so to buy a new unit because we were spending £1.2k a month on pallet overspill storage that wouldn’t fit our premises. Our own bank (trading with them for 30 years without an overdraft or loan facility) wouldn’t lend us the money (even secured against almost £1m of owned buildings in the business) because they were concerned about “affordability”. I pointed out that the loan for the building would cost less than the storage we were already paying... blank stare. (This was RBS)
So I asked another bank (Santander) and they immediately said yes how much do you want!
Then I tried Funding Circle who were also falling over themselves to lend us the money. Rate was good but there was a fee (their margin) to watch out for.
In the end the warehouse I had lined up (that was silly cheap to be fair) was taken off the market and I’ve sat it out ever since. I still have the same issue - risk of brand stagnation, more and more inventory, more money in China and now having to consider storing my inventory in Italy (my biggest market) because of Brexit. I’ve already applied for VAT numbers in 6 other countries to assist with storage/distribution stuff.
I havent tried any mainstream banks as i just feel they will all say noI’m in the almost exact same position.
Business properties owned outright, similar value to yours and considerable stock.
Own brand that has consumed an enormous amount of capital as we have grown but online so competitive that I see own brand as the only solution long term.
I approached a lender last year for £150k or so to buy a new unit because we were spending £1.2k a month on pallet overspill storage that wouldn’t fit our premises. Our own bank (trading with them for 30 years without an overdraft or loan facility) wouldn’t lend us the money (even secured against almost £1m of owned buildings in the business) because they were concerned about “affordability”. I pointed out that the loan for the building would cost less than the storage we were already paying... blank stare. (This was RBS)
So I asked another bank (Santander) and they immediately said yes how much do you want!
Then I tried Funding Circle who were also falling over themselves to lend us the money. Rate was good but there was a fee (their margin) to watch out for.
In the end the warehouse I had lined up (that was silly cheap to be fair) was taken off the market and I’ve sat it out ever since. I still have the same issue - risk of brand stagnation, more and more inventory, more money in China and now having to consider storing my inventory in Italy (my biggest market) because of Brexit. I’ve already applied for VAT numbers in 6 other countries to assist with storage/distribution stuff.
We are currently working through a broker who hasn't yet said no, so fingers crossed we get the deal were looking for.
Julian Thompson said:
Our own bank (trading with them for 30 years without an overdraft or loan facility) wouldn’t lend us the money (even secured against almost £1m of owned buildings in the business) because they were concerned about “affordability”. I pointed out that the loan for the building would cost less than the storage we were already paying... blank stare. (This was RBS)
Maddening..... it is driving many companies into the hands of some very wobbly looking alternatives. Banks are no longer supporting SME's in the way they used to - hence the rise of Funding Circle and their like.Without knowing more about the OP's business, it's hard to take a view. It's either equity or debt - maybe via Loan Notes. If there's a compelling argument for the £500k, it should be possible to raise it. But it needs to be leveraged in some way.
As an ex banker then business owner I would suggest you approach a mortgage lender as opposed to your bank.
The banks have lost their way and getting them to do anything is next to impossible. More importantly they are likely to ask for regular figures, may impose interest cover requirements and have a right of offset against credit balances.
A mortgage lender simply cares that you make the payment. End of. I use n and p via a broker.
The banks have lost their way and getting them to do anything is next to impossible. More importantly they are likely to ask for regular figures, may impose interest cover requirements and have a right of offset against credit balances.
A mortgage lender simply cares that you make the payment. End of. I use n and p via a broker.
Jeremy-75qq8 said:
As an ex banker then business owner I would suggest you approach a mortgage lender as opposed to your bank.
The banks have lost their way and getting them to do anything is next to impossible. More importantly they are likely to ask for regular figures, may impose interest cover requirements and have a right of offset against credit balances.
A mortgage lender simply cares that you make the payment. End of. I use n and p via a broker.
Reminds me of a mortgage valuation I did years ago. Borrower had grown a large chain of travel agent shops and eventually sold out for a good chunk of cash. Lovely house,, but the one thing he did say is that there were good times and bad, and two mortgages on his home was not unheard of.....The banks have lost their way and getting them to do anything is next to impossible. More importantly they are likely to ask for regular figures, may impose interest cover requirements and have a right of offset against credit balances.
A mortgage lender simply cares that you make the payment. End of. I use n and p via a broker.
Do you have a SIPP? you can use pension funding for businesses (introduced in 2015). You can arrange (via SIPP provider) a loan (at commercial terms) to your business (or the SIPP to take equity in it). That way you'd be paying interest to your own retirement und! There is the opportunity investment losses (vs whatever you was invested in previously); but Id assume you believe your business expansion can outperform these gains.
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