Business Angels or Bank Investment

Danny,

Given you have an existing proven business I would have thought your bank would be the person to approach, assuming you are actually making some good money out of the £90k t/o (I assume its largely profit as consultants, although hard to say from your post). You could presumably show that you can repay the money out of existing earnings.

Failing that for £25k - that’s personal loan territory. £12k each on the mortgage etc. Far less hoops to go through to get a personal loan, and the rates tend to be cheaper too.

I personally wouldn’t go anywhere near a business angel for that sort of cash.

Hope that helps - although I would suggest you talk to your accountant as they will be able to give far more relevant suggestions than I can given they hopefully know a lot more about your business.

Regards,

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

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Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT

Have you thought about factoring to release short term funding against invoicing your client to pay your contractors.

Not the cheapest way of doing things but it works

Factoring is where the 'factor' (ie the bank) gives you money against invoice that you have issued but haven’t been paid for yet. There are various different forms, but often your customer then pays the factor rather then your company, with the factor taking their 2-5% of the invoice value.

If you have credit control issues, or work in an industry with poor payment terms then this can help get the cash in quicker.

The flip side is that it is a very expensive way to borrow (the APR’s often make credit cards seem attractive) and its really hard to get off factoring once you have started as they normally are pretty brutal about ALL invoices having to be factored even if you don’t need the cash that month..

I tend to favour getting the companies act together with invoicing and credit control which is really just down to getting the basics right - setting sensible payment times, actually issuing the invoice on time and chasing up properly. Doesn’t work for everyone, but that tends to be where I would look in the first instance where there are cash flow issues with profitable companies.

Hope that helps,

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

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Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT

Danny,

I quite agree that the bank will want backing from you personally- which is one of the reasons I suggested sidestepping the issue and borrowing directly yourself. Saves an awful lot of work convincing bank managers to lend for the same personal risk, and often cheaper too.

I do understand the reluctance to involve your families into the business, but if you aren’t willing to take on any personal risk then there really isn’t an awful lot you can do. One option is to play ultra safe and build up a “war chest” from retained funds to see you though the next time one of these deals come up. I assume you are growing rapidly at the moment just from general business if you have only being running for 10 months, but presumably this would mean missing out on the current deal.

I would however suggest you do some proper “what if” planning here to assess the real risks of taking a personal loan, rather than your default perceptions of what they are. It is very hard to help when dealing with only a few lines about your business and I often miss the mark, but in this case it looks to me as if you are letting the admirable principle of “no family risk” restrict your options. For example have you considered repayment insurances? I wouldn’t normally touch them with a barge pole, but they might be suitable here to bridge the gap between getting the £££ you need to grow and personal risk.

As I said above your regular accountant should hopefully know a lot more about your and your attitudes and be able to make more relevant comments than I can here. If they cant, then I would be pleased to speak with you offline.

Regards,

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

---------------------------
Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT

Thanks for answering for me James. James response was the same as our accountants, but sometimes you have to do what is practical not what is ideal.
Factoring is expensive but if you can negotiate terms with the bank it is no more expensive than an overdraft and not all providers expect 100% of invoices (although some do.)
We currently Factor about 70% of our invoices on terms of 0.7% fee with a discount of 1% over base rate. Which is about standard and seems expensive but it is the only way that we could have grown our business. When funding your business explore all options than choose the best solution for yourselves
Regards