Week two of our EFG quest

Some interesting developments this week...

At The Pitch final on Monday, Mark Prisk, Shadow Minister for Business & Enterprise, talked about business funding and how his government would improve things. The main focus seemed to be on simplifiying existing schemes so that businesses know what's available and what they're eligible for. Can't argue with that! When it came round to question time, I asked him how he proposed to engage with the banks to ensure the EFG worked properly, and cited my experiences so far. Did I get an answer? Well, yes, but not to the question!!! He repeated the simplification point and said 'banks haven't been taking much risk' (really?!).

I've also been reading the Innocent Smoothies story in their book...they were turned down by all the banks for EFG. Not sure if that's particularly reassuring, but at least i'm in good company!!!

Now for a little update on bank discussions...

Bank 1 - still waiting for a return phone call!!!

Bank 2 - my own bank. Here's the good news - I have had a business loan agreed! BUT...it's not an EFG backed loan...and it's for less than I would have liked. I had a long chat with my bank manager, who is very good. The bank will effectively lend up to a certain amount on a director's guarantee basis (but without 'tangible' security such as property), based on the turnover of the business account. This is effectively done by automatic credit scoring. We submitted an application within this limit, which came back with an immediate 'approved'! Which I guess is a reflection of the fact our turnover is growing quickly month on month. It's worth noting that this wouldn't be of any help to a start-up with no trading history.

I was then faced with a choice...go ahead with the loan as approved, or put forward an application for the higher amount, backed by EFG. This would involve full business plans etc, with the application being assessed by the risk team. BUT, here's the interesting thing...the bank would still require a directors guarantee for the full amount of the loan ie not only the 25% not guaranteed by the EFG but also the 75% guaranteed by the government under the EFG. In this situation the bank also requires you to seek independent financial advice before signing the guarantee. On the basis that a bird in the hand is worth two in the bush, i've decided to go with the smaller loan for now.

Bank 3 - I phoned them before the approval from my bank, to make the initial enquiry. The person I spoke to was obviously someone who is there to take initial details and ask key questions, before passing things on to the business manager. Call me paranoid, but the minute I mentioned 'EFG' i'm sure I detected a hint of negativity in their voice!!! The business manager has in fact called me back, but we're playing telephone tennis at the moment so nothing to report as yet.

What next? Well, i've now got some of the lending agreed, which is great news. Also, i'm up for two business awards this week which both carry a substantial cash prize. That said, we are in discussions with national retailers, and with the bigger companies placing orders in January for delivery next summer onwards, I may yet find myself with lots of lovely large orders but with long payment terms, which will mean more funding is required. Obviously with firm orders from a national retailer or two my cashflow projections would be very credible, which should improve my chances. So, things might be quiet on lending applicatons for a couple of weeks as I see what happens with the awards and orders. I'll still be blogging with general comments and stories from other entrepreneurs though!