Do you need to have money to invest in your own company?

RA girl wrote: »

Hi, might sound like a stupid question but my husband would like to go out on his own. He has a business plan and potential customers but he would need a loan of €80k to really get going. Is there any legal way he can get this money without us having any savings?

Thanks

Surely raising finance is part of his business plan? I'd honestly be worried if he hasn't any idea where to get money from for a business and you're resorting to using the word legal in your query. The world's biggest industry bar none is geared around lending money. If the plan is sound you'll get money.
Apart from that, it's start small and build it up.

Banks like to see something being put up by the borrower, and to minimise their exposure. Do you have equity on your home? He'll probably need to sign a personal guarantee on any loan using that equity if you do.

Really it boils down to what the €80k is needed for though, and he should check if any of that can be part funded through grants. Standard response I know, but first port of call should be LEO to get some help, and see if he can apply for grants - capital expenditure, employment etc and depending on the area of business other bodies like Bord Bia etc might have grants he can apply for. If he has 50% grant funding on equipment and is asking the bank to find the other 50% it's a much stronger proposal.

RA girl wrote: »

Thanks for the reply. A business loan is his plan but do they not need you to have some money yourself? What I meant by legal was for example getting an ordinary personal loan and use it for the new business...I'm not sure if that is legal.

Well you'd get better rates for business loans. There's nothing terribly wrong with starting with a loan but it needs to convince the bank. As others have said LEO really should be the first stop and they can provide details on other supports.

RA girl wrote: »

Thanks for the reply. A business loan is his plan but do they not need you to have some money yourself? What I meant by legal was for example getting an ordinary personal loan and use it for the new business...I'm not sure if that is legal.

So no plans to rob a bank then

I needed the exact same amount of money when I set up in 2008. I put in €30,000 of my money and got a €50,000 business development loan over 4 years for which the bank wanted a personal guarantee.

I would expect a similar scenario would still be possible if the business plan is sound.


You do need to look at a "worst case scenario" if the business did not go to plan and how easy it would be to return to paid employment and how much can you afford to gamble.

I'd also look at getting an accountant to look at the figures and provide advice and the viability of the idea.

Personally I hate the thought of using a business loan to get started. Business is stressful enough without having to make repayments and when times get tough an €80k loan is going to be some weight to carry. Like a puppy, a loan isn't just for Christmas so be careful.

Make sure you look at grants with LEO, wage subsidy schemes, New Frontiers and CSF with Enterprise Ireland, maybe talk to investors (at the very least a good investor would give your idea a reality/sanity check).

Best of luck,