Funding

Umm funding.... the nihtmare of starting any business.

I have probably read every book on funding and they all say just how tough it is to source funding and they are right.

I've been working on it for over a year now, and have learnt a lot of lessons, and think the end is in sight...

A few key lessons...

You have to take the risk... if your not prepared to get into debt over your business then no one will lend you money. If you are not 100% behind your idea and preprared to risk everything, why on earth should someone else. You have to have the passion and the reason to be working whilst everyone else is watching the rubgy world cup final... If you ever mention to anyone your trying to get funding from that you think it's too risky for you to gamble your own money you will be out of the door faster than you can say 'oops'

Banks will not lend unless they have 100% (or very close to it) security. So If your house is worth £100k and you want to borrow £100k no worries at all as long as you sign the house over to them, or something similar. There is a scheme called the small firms loan guarantee scheme which means the gouvernment will underwrite a percentage of the loan (about 75%) but the bank still needs to have their 25% guaranteed. The golden rule of the scheme is the bank have to judge the decision on the loan based upon standard criteria so it's still not a walk in the park.

Banks are really hard work... they do not take risks and it can be hard to explain your idea if it's not something fairly standard. Unless you cannot cover the loan with securities then don't waste your time. If you can they it's a different ball game and you can play them all off each other.

I went to all the banks about a year ago with a plan with the small loan scheme, but still didn't have my share of the loan secured and was pretty much sent away with a flea in my ear. Every bank said no.... Wanted nothing to do with me and a number of them made it pretty clear i had just wasted their time and told me in no uncertain terms... Amusingy i'm now in a position to secure a loan and they are falling over themselves to help. I so want to tell them all to f.... off, but doing the finance this way will save me a lot of equity so i can't....

Dragon's Den.
As crazy as it seems it's worthing trying this route. The process is certainly an adventure and if you get to the later rounds and end up in manchester in front of a camera it certainly gives you something to talk about...

Angels
Angels are hard work. There are a lot of people who want to take your money to pitch your idea in front of angels and it's a real minefield. Your best bet is to contact your local business link and try and get some bona fide angels in your area. The hard part is they all have something to say and experience to bring and unlike Dragon's Den when it's over in an hour or so, talking and negotiating can take weeks and months. Your business case has to be great and farily well proven, not just an idea.

Credit Cards..
The easiest source of funding! No equity, if you apply for a few you could some quite hefty credit and you give no equity! High risk but if your idea is good then go for it. Thanks to 0% balance transfers it can also be cheap!

The other thing to do is prove the concept. Don't just say you have a good idea, but actually go out and get sales, and not to friends and mates. I've been trading now for 18 months and have build up over 1000 customers in 11 countries over the world. This has proven the people that there is a demand for the products and that i can go out and sell. For me this has made the biggest difference and got people to listen. Suddenly all my figures can be based on hard evidance and that risk for them is that little bit different. I found my investors of the back of a pr story the local paper ran. The paper were interested that i had all these customers all over the world even though i was making the products in my kitchen. I'm making no money as i need the proper machines and kit to make in bulk and bring the unit price down, but it's prooved the concept and that's made people feel more comfortable.

Hope this helps and good luck!

cheers

A

www.funkypuffin.com