Just had a long conversation with Bank 1, who have declined my EFG loan application for the following reasons...
- I need to match any lending with the same amount of my own funds
- the business is forecast to make a loss in year 1
Oh how frustrating...I put together a realistic cash flow forecast showing the business making a loss in year 1, breaking even in year 2, and making a profit in year 3. But what the bank says is that because the business won't be making a profit straight away, the debt is not serviceable. I guess that's true in the short term - in effect for the next six months repayments will come from the loan funds, but surely in the vast majority of cases no business makes a profit in the first few months of trading. And in our case, the extra expenditure in the next six months is to get stock in place to fulfil orders from a large retailer.
As for the matched funding thing, it's just one more barrier for those with a good strong growing business who have exhausted their own funds.
So, where do we go from here?
Our application to Bank 2 is still outstanding (although i'm not optimistic after today's conversation with Bank 1).
I'm trying to take heart from the Innocent Smoothies story....turned down by every bank for the EFG then got angel investment at the 11th hour.
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