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Also my brother has a stupid credit rating thus this has always affected me when i come to open bank accounts and credit cards etc.
ACCEPT if i do it at my own bank they seem to like my credit score there.
Anyway i have a business meeting at barclays bank (uk)
in march and wish to open a business account and have asked for a £5000 loan.
Im thinking that to go without a business plan is just plan stupid, so im going to look to impress on that side. But im confused as to how i should really come up with my figures.
It always amazes me when i hear about peoples business plans and they have "estimated" that they will be turning over £500,000 within two years! How do people come up with these figures?
If any one can help with these questions then maybe one day i can share my millions with you lol!
1. How do i estimate how much i will turn over a month etc.
2. How long should my business plan really be?
(ecommerce store, typically selling items under £30.
quite a popular product)
3. I will be printing this my self this is ok im sure but just checking, i would like to give a good impression!
4. I would prefer to be a sole trader just because of the lower amount of paper work! Any body disagree there?
5. Any other tips that could seal this for me? With the extra money im sure that i can be making a good amount of money in 1 years time, It would certainly motivate me to go and succeed.
Thanks for reading!
In short, my advise (a fellow British sole trader) is don't take a loan!
Without a loan your business can only be in the black, or at worst have a nil balance. Loans have to be repaid, and are costly.
I would prefer to be a sole trader just because of the lower amount of paper work! Any body disagree there?
As a sole trader YOU are liable for any debts (assuming you wont take my advice, I have two sons your age so I know you will ignore me <g>), however, being a LTD company means the company and not you are liable for debts, you can walk away laughing - sounds wrong and it is, but its the way of business.
If you will listen to one piece of advice, it should be this. Ask your local small business advice service for some ideas, or Citizens Advice Bureau, or dare I say it, parent?
Matt
Well, good for you on starting a new business!
Ok for those that done know im like 20!
Shouldn't make much difference - I wouldn't worry about that.
asked for a £5000 loan
You want to make sure that any credit you get is for the business, not for you personally. This makes a difference - if the business goes bust then you don't want to be owing the money.
This will also make a difference to the bank's willingness to lend the money, of course - if a loan is secured against your own assets then they'll be more willing to lend to you, because if the business goes bust then they can send the bailiffs round to you.
But this is bad for you - so I'd recommend registering a limited company (see below) and when they ask you if you're willing to make a 'personal guarantee', I'd recommend saying no even if this means they won't lend you the money.
to go without a business plan is just plan stupid, so im going to look to impress on that side
Good plan, but the bank might be looking for security too. £5k is a relatively small amount though, so they might not.
There's more in this thread:
[webmasterworld.com...]
about the pros and cons of different sources of finance.
It always amazes me when i hear about peoples business plans and they have "estimated" that they will be turning over £500,000 within two years! How do people come up with these figures?
Often with a large dose of wishful thinking! Don't be too impressed by other people's business plans that look like this, quite often they're just unrealistic.
1. How do i estimate how much i will turn over a month etc.
"market sizing" means working out how much business you might do. There's a couple of ways to approach it - depends on the industry you're in. Tell us more about what you're up to and we should be able to help more.
2. How long should my business plan really be?
(ecommerce store, typically selling items under £30.
quite a popular product)
If you ask the bank, they will probably be able to give you a template - a blank business plan - showing what kind of length they like, and what kind of issues you need to address.
For something like this, maybe 10 pages plus figures?
3. I will be printing this my self this is ok im sure but just checking, i would like to give a good impression!
Yeah, that won't matter. Laser printed will be fine. *DO* watch out for your spelling and presentation though. Get at least one other person to proof-read it carefully.
4. I would prefer to be a sole trader just because of the lower amount of paper work! Any body disagree there?
The disadvantage is that you're personally liable for the business. I.e. if things go wrong, the bank can take your assets.
With a limited company on the other hand, the business is legally considered a 'person' that's separate from you, and unless you make personal guarantees (or you do something illegal or fraudulent) you can't be held liable for the businesses debts. That's what the 'limited' part means.
See also:
[webmasterworld.com...]
[webmasterworld.com...]
The paperwork isn't really that heavy - on one limited company that I own which has quite straightforward accounting, I do the book-keeping myself, and I pay an accountant £150 at the end of the year to prepare the accounts. So not a big burden.
5. Any other tips that could seal this for me? With the extra money im sure that i can be making a good amount of money in 1 years time, It would certainly motivate me to go and succeed.
Top tip: Don't borrow money (or get equity investment) unless you have to.
It's absolutely possible to start a profitable web business with £0 in cash.
Second tip: The mechanics of getting started (incorporation, finance, etc) are much *LESS* important than thinking about the value proposition you're going to offer to customers - why would they buy from you rather than your competitors?
A recommended book: "The New Business Road Test" by John Mullins.
If you're in London, sticky-mail me for details of a monthly networking group for entrepreneurs, come along and say hi.
hope that helps, a.
Ask your local small business advice service for some ideas
Matt's right, give Business Link a call for some free advice.
a.
Great posts from both of you. I had to laugh when i read that you have sons my age and that i wouldnt follow the advice lol.
Im going to speak to my local small business center and see what they come up with for me.
Market im in is men/women clothing. I can offer the best service i feel and the site looks great. Better than the 2 biggest market holders anyway. Simple things like offering a telephone number and same day dispatch straight away is "BETTER" than what my competetion is doing.
Andye - im from just outside london so the networking idea sounds great. I have always heard of these things before but was unsure about what it exactly involves! I always imagined it to be people standing around talking about their business's with a pint of beer perhaps. Maybe im wrong!
The joys of being young! Although it would be so much better to have more money behind me.
Thanks
when i was 19 barclays leant me money for a business - at that time it was 1,000 (>20 years ago) but my father 'guartanteed' the loan for me.
banks might lend on a track record eg. they might give an unsecured loan if you have x years of trading accounts that they can base their calculations on.
in my opinion a business plan isn't worth much, banks calculate risk - these days the member of staff makes some entries into the computer and it comes out with how much you will be lent, they don't have much (any) leeway for making a personal assesment of your plan.
you do need a plan just to show that you are serious but imo what it actually forecasts is irrelevant.
sole trader/limited company - there is no need to become a limited company unless you are exposing yourself to very high risk, like liability claims.
if you do become a new limited company and you become the director then the bank will almost certainly not lend the company money without you guaranteeing it.
i would find a family member who will guarantee the loan for you (this will also make the interest rate less too - because the risk to the bank is much lower)
alternatively if you can go to the bank with 2,500 (borrowed from someone else - but they needn't know that) and ask them to lend you another 2,500 they are more likely to agee to it ... having start up money already will score you points in the loan assesment.
... just my opinion :)
good luck
I agree totally with what you just said as i dont feel that would give me alone. Because my brother also my age has very high credit cards and has also gone against me in the past.
The point about going with maybe £2500 and asking for another £2500 is what really interests me.
Are the chances of their systems accepting my loan alot greater if the above was to happen?
imo, yes.
Andye - im from just outside london so the networking idea sounds great. I have always heard of these things before but was unsure about what it exactly involves! I always imagined it to be people standing around talking about their business's with a pint of beer perhaps. Maybe im wrong!
Heh Heh Maybe you should go to PubCon. That is exactly how the networking goes. Although it is normally people with businesses talking about their beer ;oP
Best of Luck
Ska
In your case the business plan might be more than worthwhile, however, since all sorts of "how to" and "what if" questions pop into my mind when I read your post. For example, in retailing you inevitably have inventory and in mail order/ecommerce you have fulfillment requirements. Both of these take planning and maybe some upfront money. Of course you may get manufacturers or distributors to handle at least some of both your inventory and fulfillment requirements. But then how do you "ride herd" on them when business, hopefully, starts moving and moving faster? Can you get agreements with teeth in them? Remember record keeping and admin have killed more than one new business.
Other key questions include getting traffic to your site, maintaining and improving the site, handling customer service and on and on.
Well thought out and realistic answers to these kinds of questions are the reason you need a business plan.
Also, you owe it to yourself to exhaust all the possibilities of bootstrapping the business until, and if, you get to the level that you have a basis for an impressive lending or equity package. In your case such preliminary and positive progress might get you an alliance with a key vendor and/or website support firm. You will need a business plan and solid progress to pull that sort of thing off.
Bootstrapping ought to be exhausted at least mentally if not practically. But to do it mentally requires at least a simplified form of a business plan.
One respondent recommended that you avoid a loan. This is sound advice. Or, if it appears to be the only way, then stop focusing on the "will I get it" and shift your focus to "how do I improve the odds that I will be able to pay it off!" If all of this is concisely described in your plan you have improved your chance of getting some form of outside financing in the slightly longer run.
Good luck!
Pubcon sounds like a dream!
Market im in is men/women clothing. I can offer the best service i feel and the site looks great. Better than the 2 biggest market holders anyway. Simple things like offering a telephone number and same day dispatch straight away is "BETTER" than what my competetion is doing.
One key metric is going to be your cost of customer acquisition. Will you be using PPC advertising? If so then how high will you have to bid? Does that leave you enough margin?
You'll need to cover this type of stuff in the marketing plan (whether or not you go for a bank loan)
On market sizing, one approach would be (assuming you're going the PPC route):
- get estimate of cost and traffic from Adwords (this estimate will probably turn out to be wrong, but at least it gives you a ballpark)
- try to find out industry standard conversion rates and basket sizes (this could be difficult, but worth a try)
Number of visitors * percent conversion * average basket size = gross revenue
i hope i'm wrong but i think you are unlikely to get a 5000 pound loan without you putting up any kind of guarantee
I think you're right, but he might be able to get near to this - my local HSBC does £3k credit card unsecured to a limited company after the bank account's been open a few months.
best,
a.
PS Adam, new book "Simply Better" by Patrick Barwise might interest you - his thesis is that "consumers care more about basic benefits than unique selling propositions" - and it sounds like that's the route you're going down.
PPS Julian Richer (of Richer Sounds) 's books are also good on this theme - and encouraging for any u30 entrepreneur!
It's administered through the high st banks, more info is at:
[businesslink.gov.uk...]
hth, a.
I will look into them books!
Always been a fan of buying books i recommend that to anybody you can learn so much! Only if you read them of course ;)
I hope not!
Not to be unkind, but, you haven't done your homework!
Lending you money right now would be foolish, if they do, then they must be desparate!
you do need a plan just to show that you are serious but imo what it actually forecasts is irrelevant.
If you have some pie in the sky forecasts without realistic steps to get there, only a fool will part with his money by giving it to you. (Then again, there are a lot of fools out there...)
But if you've shown that you've done your homework and thoroughly researched the market and your competition and give a believable forecast, then that's about the best you can hope for. Other factors will then come into play (credit worthiness, collateral, etc.) as to whether or not you get the loan.
