Other options include regional development agencies or devolved governments and venture capital. My only experience is with Finance Wales, the “Venture” Capital arm of the Welsh Assembly, and venturesome they aren’t! We did get a loan but it needed very strict personal guarantees where death is no obstacle to them recovering their money. If you are a super salesman, have at least nine months to spare and, preferably, can justify over £1 million of capital injection, then venture capital and “Business Angels” may be the answer but don’t count on it! Alternatively, move to the California, where there is a venture capitalist under every tree.
Without any track record, you will have trouble convincing a bank that your business will be viable, and even more persuading your partner to stake the house on it. The only option most people are left with is to bash the credit card. This is expensive money – how can you justify a typical interest rate of almost 20% when bank base rate is 0.5% and UK inter-bank rate (LIBOR) is about 1%? But that’s what banks are about.
Still, if you can get the business started and are able to produce even 6 months actual figures to justify your imaginative cash flow forecasts, you have more of a chance of convincing the bank to lend you unsecured money. Surprisingly, I have found that exciting forecasts with barely believable growth projections are more likely to win approval than cautious and prudent ones, because the bank will assume that your figures are over optimistic and downgrade them anyway.
The UK falls squarely between two business financing models and the result is a typically British (bad) compromise. Germany has lots of regional banks with strong links to industry and an ethos of financing business, while the US has a strong venture capital tradition. Britain has neither, and the current government isn’t helping much despite the fact that we own most of the banks.
For more information on financing your electronics startup, visit Business Link Site.
The next post in this series will discuss the regulations a new electronics business has to comply with.
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In England it is allowed to use a peosanrl account for business purposes, although the banks do not like it because they cannot charge what they want. That is the whole point. An account where they cannot charge to start with. Once they find out you are using it as a business account, give them the choice of either good terms and facilities for a business account, or tell them you may consider going elsewhere.You are in business, but so is the bank. To a certain extent you are competing with the banks they want as much of your money as they can get, you want to give them as little as possible.
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