Acquiring startup capital

[Paul2412]

Is there any advice for aquiring capital for a startup software company? So far, HSBC was worse than useless and the other banks seem to have to be chased so we can give them money by means of a business loan.

 

Bizarrely, SYIF are not interested because we have not traded as yet.

 

When we are offering a directors guarantee, in addition to a solid business plan and good financial forecasts I'm running out of things to do. We are after £15,000 which is hardly a great amount to start a company. I thought the government were keen to assist new businesses? So far, its proving impossible to be even given a chance!

 

Have an interview with Natwest about a loan, but after the experience with banks so far is it worth looking elsewhere for capital?

[steveroberts]

Interesting dilemma! You're challenge will be the amount. Most investors would suggest that for £15K; why don't the directors invest themselves if it is such a good idea. £15K is below the radar of most investors. You could try the Yorkshire Association of Business Angels (http://www.yaba.co.uk)

Can you say more about what the money is for and what the software does? Feel free to PM me; I help people get businesses started for a living.

[steveroberts]

Paul, can you let me have your email address?

[lizzie88]

What do you mean by "the other banks seem to have to be chased so we can give them money by means of a business loan."?

 

Steve - do you mean £15k isn't a big enough amount to warrant serious consideration? I'm wanting to get a small start up loan of about £5k - surely that means I'll have even less chance?

[steveroberts]

Lizzie,

there's no science to this...just experience. VC's are looking for big opportunities; big risk, big rewards. For every success they have...a number will fail...they hope there are more good ones than bad! But irrespective of the size of the investment, you still incur the overheads of doing your due diligence i.e. it is not cost effective for a VC to invest small amounts; hope this makes sense

A loan is normally provided to existing businesses who have a cash flow problem; it could be late paying customers, it could be to buy components to meet a customer order i.e. they have to pay the supplier before the customer pays them. Loan funding is not, typically, appropriate for investment in developing a new product/service or starting a business.

The third source of possible funding are business angels; normally successful entrepreneurs with spare cash who are either bored or are looking for a new opportunity. Trouble is £15K is not, in most investors minds, a huge sum to invest, particularly if you are an existing business with assets or shareholders with personal assets (homes etc)

 

The government introduced a scheme called the small firms loan guarantee scheme to bridge the gap between traditional lenders and angel investors (it's called something else now); under this scheme the government guarantee up to 75% of a loan making it less risky for the banks to support people and companies with a gap in their funding requirement.

SYIF did have a peppercorn fund but as of January this year, the fund was spent up. I know they are hoping to get more money later this year so they can relaunch it.

If the business is a social enterprise, there are sources of funding specifically targeted at this area but I've little experience of dealing with these sources.

Be aware that most smart investors will spot companies and individuals who are looking for cash to fund their life style; they will expect the company and individuals concerned to be suffering pain...if you're not prepared to take risk, why should they!

The other thing I always consider is what is the money for? So for example, it might be to get a new piece of software designed. Are there software companies who might be prepared to develop the software for as piece of the action (remember what they charge commerically is greater than their actual cost so they may see an opportunity). that way the work gets done without the need to find a third party. Can you offer the promise of a big order in return for doing some work up front now...and so on.

Hope this helps and good luck

[Bloomdido]

Have you considered making your business a Social Enterprise? This would potentially unlock other sources of income. Talk to these people if you want to find out more. Doesn't matter that it's in Rotherham.

 

Charity Bank (and other social banks) also offer services that the big banks don't. The Social Enterprise team will have much more information.

[indizine]

You don't convert a commercial enterprise into a social enterprise. The two are completely different animals. Not least, you cant reap the profits you make.

[saxondale]

have you considered why the banks all say "no........." - time to take a good hard look IMO.

[Bloomdido]

You don't convert a commercial enterprise into a social enterprise. The two are completely different animals. Not least, you cant reap the profits you make.

 

No they aren't. You can make money and pay yourself a salary. You don't get to line the pockets of 'shareholders' though as the profits are reinvested in the business or the community. There's the difference.