personal loans?

A personal loan is personal to you. If you can't make the payments then you fall in to debt and get taken to court. Insurance probably wouldn't pay up as being self employed you'd not meet the criteria for most loan companies payment protection.

Personally, I'd try getting a business loan first....
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You would not be able to get an unsecured personal loan unless you are still employed and can show you can make the repayments.  You would be able to get a secured loan, ie against any property you own .... but that is not a good idea!

There are some companies out there who will take a good business plan with sound projections on the cashflow and lend against it.  However your first port of call should perhaps be your friends and family .... see if they want to inject some cash into your business .... ask yourself one question .... if you were asked to put some money into your business and read the cashflow and business plan .... would you do it?? If the answer is yes then go for it!

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I think I should point out for clarity:

1. ANY business loan at start up stage will almost certainly be personally secured on you
2. If you operate as a sole trader (as opposed to a limited company) you are personally liable for all debt anyway whether it is notionally a business debt or a private one.

It is generally quicker, easier and cheaper to borrow in your own name, rather than as your business for small sums and I personally would try that route first, for example drawing down on the equity in your home. Banks will tend to only match your investment into the business 50:50.

More generally if you are borrowing more than you feel comfortable with perhaps think about saving up for a while so you don’t need to borrow as much or at all and also approaching your business in a different manner. Ie do you need to use this franchise? Or can you do it on your own? A lot of franchises just really give you some confidence and a business plan and little else, although on the upside they do often save people 6-12 months of making mistakes in the early days, especially when people are going away from what they know and starting up in something they know nothing about.

In terms of your exit plan, generally what happens if things go wrong is people get a job to pay off their debts, save up some cash and then try again. Therefore think very carefully about the "what ifs" ie what level of repayments could you achieve within your regular employment? Ie in the worst case scenario and you incur all the set up costs, and run without any meaningful sales for 6-12 month, can you still cope with the debt? You can then set you maximum borrowing levels accordingly, comfortable in the knowledge you will not be eating 9p baked beans every night for the next 20 years if things go wrong.

Hope that helps.

PS Actually I quite fancy beans on toast, not had that for ages!

Regards,

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James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773

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