by William Monday 10 August

Welcome to the FirstFunding blog

Please feel free to browse the articles and add a comment. We will try to give you a bit of guidance on attracting lenders, how to avoid some of the common problems in working with an online service and where else you may find help at a time like this.

Do not hesitate to add a comment. And if you want to make personal contact just email me: william.flatau@firstfunding.org

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by William Friday 21 August

Recent Applications posted online

Some interesting funding applications posted in the last few days:

• Clothing company - £100,000 required for Design, manufacture and distribution of jeans. Creation and promtion of a Jeans brand.
• Digital web agency - £250,000 required to devise and execute online strategies for assisting UK financial services companies.
• Education & youth services - £500,000 required to roll out the provision of life skills courses.
• Bridging Finance - £450,000 required to fund short term bridging finance for property purchases.

More details here »

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by William Friday 21 August

Setting the right interest rate

Our approach at First Funding is different from banks. The borrower decides the rate he is prepared to pay, rather than the lender dictating the rate. We have guidelines on a drop-down menu in the application form to help you decide the appropriate rate you should offer.

Remember that lenders expect a superior return on their investment compared with what they could get in a bank or on the money markets, although the beauty of dealing with private lenders is that they can be highly flexible when negotiating a deal.

Typically the interest rates you might expect to pay:

• 6% - for a business showing strong profits and net worth, with clear evidence of ability to repay, with security to back the deal.
• 8% - for a strong business where there is less security available to support the deal
• 10% - for deals with a larger element of risk, or where the loan size is small
• 12% + - for deals involving special circumstances, such as bridging finance at short notice. Mezzanine finance to top up a bank facility required for building development may be charged at 30% or more.

The issue of security can be addressed with loan finance insurance, available from our insurance partners.

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by William Friday 21 August

SUCCESS STORY: Fancy a Ferrari?

Ecurie25 - £160,000 loan: Chirag Shah's supercar club was unable to get funding from the banks for more cars. He wanted to add a Ferrari California to his fleet of supercars for members to rent out. First Finance put the serial entrepreneur together with Ahyan Atadia, who agreed a loan for the car after a short meeting.

Chirag commented: "It is important to our members that we upgrade our fleet continually to keep them interested. We can no longer rely on banks for our finance, which is why operations like First Funding are so important for business in the UK."

See this story on BBC TV.

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by William Friday 21 August

SUCCESS STORY: Rescue for an aborted bank loan

India Dining - £280,000 loan: Asad Khan found a lender to buy his third Indian restaurant after his bank refused to honour a commercial mortgage offer, leaving him with a £120,000 deposit at risk. A private lender who learned of Asad's plight offered a 10-year mortgage with no arrangement fee.

"I was facing a desperate situation after I had paid the deposit on the new restaurant, and the bank cancelled a loan which they had previously agreed. First Funding found a private lender who enabled me to buy the premises and get on with building my restaurant chain" commented Asad.

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by William Monday 10 August

Attracting Lenders

When you list your business proposal on First Funding you need to bear in mind the three fundamental rules of lending:

• Criteria: is your business proposal the kind of deal a lender wants to do? a mortgage lender for example, would not lend to a manufacturer who wants to import components. Some lenders are comfortable working with specific types of business, perhaps one he previously worked in. It is important to specify not just the business sector you are in, but also the kind of loan or facility you need. This lets the prospective lender gauge quickly whether your business is the right one for him to lend to.
• Identity: when a lender looks into your background, does he see someone who is truthful, diligent and cooperative? He wants to know that you are the kind of person who pays bills on time, manages affairs in a businesslike way, and someone trustworthy. The message here is to present yourself in the best possible light. If you commit to an action, deliver on time; take the fundraising exercise seriously - don't be glib, flippant or arrogant - you may turn a potential lender cold.
• Servicability: this is the most important rule of all, where a lender will ask, "based on what I know about your business, do I believe you will repay my loan within the terms we have agreed?". This is the hard part. You need to ensure your business plan is sound and your forecasts are realistic. The most common mistake in business is to overestimate sales and underplay the expenses. Your figures need to show that you can afford the monthly repayments on a loan.

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