creative way around sourcing bank loan deposit

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rupert7

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looking for loan for £1.5m to purchase business.
bank will give me £1,000,000 so i need £500,000.
bank interest rate will be 4%, investor for the £500,000 will be 12-15%.
Huge difference in interest so was wondering if there are any other ways to source the £500,000 at a better rate?

i'm thinking along the lines of linked finance where you can get £250,000 for 8.5% (potentially) but you need to be in business for two years for this.

if i was to apply for £500,000 from another bank would get at 8% and would only need £150,000 crom investor at 12-15%.
Doubt another bank would give me loan for this.

Just wondering if there are other methods like this i could explore to reduce the overall interest rate.
 
Firstly, I'm assuming your numbers are in Euro, and you need to borrow in Euro?

What are you buying? Is it 100% of the share capital of an existing company?

I assume it's you personally that needs to borrow the money, rather than the company?

That changes your options. It also changed the tax implications, and the net cost to you.

Is the company currently debt free?

Does the company have assets that can be financed separately? E.g land / buildings that could be put into a property company, and someone else finances that, and your company pays rent to them?

Does it have other assets that can be financed via asset finance type structure?

Have you looked at other banks / specialist lenders?

Do you currently own your own home debt free, and are you willing to put it as security?

12-15% might be reasonable depending on the risk level your silent partner is taking on. Are they looking for a share in the business with a share of growth in value, or a straight interest rate? Have you discussed share options with them?
 
RedOnion said:
Do you currently own your own home debt free, and are you willing to put it as security?
Click to expand...

This is one you could certainly look at.

Why not sell your family home and rent for a while?

In other more entrepreneurial countries, people rent but invest their money. Home ownership is seen as a break on people starting their own business.

Or if you don't want to sell it, could you remortgage it with Pepper?

Brendan
 
i am actually renting at the moment.

i will be taking a company loan out and tge bank or happy to take long term lease on business premise as security.

the business will be able to meet the bank repayment and investor even at 15% but would like to explore ways of reducing the amount subject to the 15%.
it may not be possible.
 
How much of your own cash have you put up for this? I'm not being nosey - it's a genuine question.
 
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