Start up credit question

defiant12

Hi Guys,

My missus is an extremely talented (if i do say so myself) baker and has been doing occasional cakes (wedding, christening, etc) for a few years now. She is also a potter, so does cake toppers, keepsakes and one off pieces to accompany her cakes. She already supplies a local cafe and a couple of shops. It has got to the stage where she cannot keep up with demand just by working from our kitchen.
We think it is time to take the plunge and formally set up as a business and rent a premises. She had been unemployed for a couple of years so would be able to commit full time to the venture with me helping out part time.
I am putting together a business plan, trying to gauge the potential earnings and figure out what the start up costs will be.

We are thinking of setting up a partnership with just the two of us in the beginning.
As a one income family with kids the recession has hit our household hard, our credit rating is dreadful and we are carrying a lot of personal debt.
I am still working on the numbers but i'm certain that this is a viable business with potential for serious growth.
As a partnership we have no capital to invest in our business and would have to borrow to cover the start up costs and first few months of trading.

My question is this; will our personal financial situation affect our ability to borrow funds for our business, no matter how sound that business may be?
I think i already know the answer though...

rolion

Not sure i got it right but if she did all this before setting a legal framework,i'm afraid you can use it as historical data due to legal reasons !

Also,i'm opening a business bank account myself ,asked for a credit card (even if i told them i will put down as deposit a set amount to match credit limit) and the bank said we have to review your account after 6 months...and they asked for business plan from day one.

TBH...forget the banks,do it with domestic funds,keep it simple ... and... sweet !

Good luck...

defiant12

Yeah, we won't be able to use any of her history but we can use the orders that we have to re-inforce our business plan.

What options are there bar the banks? We do not have the capital to invest in the start up and as a one income family we'll never be able to save it...

Boom Boom

Hi Defiant,

This is an all too common problem these days. One option is get your plan together and depending on where you are based in the country take it to a local partnership/authority office and see if the have any grants available for start-ups.

Another option is to use your own capital set up as intended work your socks off for 6-12 months and try generate a healthy cash bank balance then you might have something to go to the bank with and try get credit then.

Finally there is micro-finance using the likes of First Step but there interest rates are slightly higher than commercial banks

hope this helps and best of luck with your venture

bigneacy

Hi Defiant,

Can I ask... If she has been doing it succesfully for a while on a small scale, then I assume she has all the necessary equipment in place (even if it is basic) to conduct the business.

Why the big need for loans and capital?

If its a space issue, could you not just rent a retail unit with kitchen to the rear, or even a small retail unit with potential for a kitchen to the rear? A decent enough van can be sourced for as little as €1000 if you really need it.

You'll presumably be entitled to BTWEA, so that would cover bills and groceries and home costs for the first year or so...

Try to fund this from existing capital. Less than €5000 will see it through. I know its still a lot of money especially for a family struggling in a recession but there's genuinely no need to start sinking thousands into this.

Thats the sort of thinking that got us into the mess we're in!

If it goes well and can employ both of you after a year of proper business then the business is a goer. Get your loan then if you still need it.

Edit

I've just read through defiant12's previous posts on boards. It is now clear to me that the €5000 tops needed to finance this new business will be very hard to come by. The recession seems to have hit him and his family extremely hard.

A loan would be even harder to get. And I have to say, you'd be completely mad to start getting yourself into more debt than you are already in.

Is there a relative or friend who could lend you the start up finance you need (interest free)?

defiant12

Thanks for the detailed reply bigneacy.

After a year on JB she no longer qualifies for any welfare payment as she is assessed on my income which is too high??!! As she is not currently in receipt of any payment i do not believe that she is eligible for BTWEA, though i will check it out.
The only way we to improve our situation is to get up and make something happen. She has the passion and enthusiasm for her products and is determined to make it work.

Working from our kitchen with one oven is the problem, she continually has to turn away business. We would need to invest in a couple of larger ovens and a dishwasher but it shouldn't be crazy money.

Things have progressed this week. We have found the perfect premises at a very reasonable rent and a friend wants to come on board who will have money to invest. The location is next to a secondary school. Our target market for novelty cakes will be passing by our door dropping their kids to and from school and there is potential for a nice earner from school lunches. This involves more retail than we had initially planned but it is looking like the way to go.

We are meeting the county enterprise board next week and will take it from there.

One question for you guys.
It was recommended to me by a bookkeeper that we should operate as a co-operative. She couldn't really explain this very well but thought that it would have the limited liability protection of a company without the associated costs. I hadn't heard of this and can't find much info on the net.
Does anyone know what she meant?

bigneacy

defiant12 wrote: »

It was recommended to me by a bookkeeper that we should operate as a co-operative. She couldn't really explain this very well but thought that it would have the limited liability protection of a company without the associated costs. I hadn't heard of this and can't find much info on the net.
Does anyone know what she meant?

hmmm... thats a strange bit of advice... I would have thought a 3 way partnership or limited company would have been the best solution... Unless she knows something we don't...

Could it be something to do with grant eligibility for your local area of your particular industry? Rural grants or something perhaps?

defiant12

I thought it might be something got to do with grants alright but she was not at all specific.
I'll discuss it with the enterprise board and see what our options are...