You have had this great idea for a new widget, or can see a gap in the market for an imported product, so how easy is it to set up a new electronics business in the UK? To test the water, you could just make some in your shed or import a few shipments and sell them on Ebay, (although HM Customs and Revenue are now data mining online to try and catch informal business and get more money!) but how easy is it to then create a formal business?<\/p>\n
\nThe answer is not very, because every arm of government, with their allies in the banking industry, will put obstacles in your way because they do not understand industry and believe regulations are the most important thing in the world.<\/p>\n
Let’s start with trying to get some money from a bank. If you thought consumer banking is a cartel with no real competition between a few major players, business banking is even worse. The limited number of banks who offer business banking all operate the same selection criteria and all hate electronics, which they do not understand. If you are very persuasive and have a great business plan, they will then want security and if you haven’t got a house or the spouse won’t let you use it as security, you will be stuck. <\/p>\n
This is where the government should step in with loan guarantees to protect the bank from some of the risk inherent in new startups, which is a great idea but successive governments have never got these right. Either the banks, who are noted for their greed, try and convert all the dodgy loans and overdrafts they already have into new loans covered by the scheme, or if this is stopped, they pretend they have never heard of it because it is too much effort dealing with the bureaucracy. <\/p>\n
You need to do your homework and find out what schemes the government currently have in operation so you can brief your bank manager about them, because even if he has heard of them, he won’t bring it up. Plus governments can’t resist tinkering and announcing changes or new schemes constantly for PR purposes- “we are doing this … to create more jobs, promote growth etc.”. The current government’s national loan guarantee scheme seems to just be a bribe to the banks to lend to established business slightly more cheaply and won’t benefit startups. To those who have shall be given, a typically Tory message. But there is an older scheme, the Enterprise Finance Guarantee<\/a> that you should remind your banker about. 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. <\/p>\n 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.<\/p>\n 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.<\/p>\n For more information on financing your electronics startup, visit Business Link Site<\/a>.<\/p>\n The next post in this series will discuss the regulations a new electronics business has to comply with.<\/p>\n","protected":false},"excerpt":{"rendered":" You have had this great idea for a new widget, or can see a gap in the market for an imported product, so how easy is it to set up a new electronics business in the UK? To test the water, you could just make some in your shed or import a few shipments and … Continue reading Starting UK Electronics Business – Finance<\/span>
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\nOther 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 \u00a31 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.<\/p>\n