Confirmed orders, approved finance, still no loan from the banks

[Wolf]

So I started this business idea, putting a beautiful website online to test the waters. It went surprisingly well, a lot of interest, and my first sale after not even 2 weeks, the business could have made a million rand turnover after not even 4 weeks of operation, 2500 visits on the website, google budget was exhausted every single day.

So after the first sale was signed by the customer and approved by his bank I went to my bank to get a bridging finance of 450.000 for 6 weeks time.... declined....

I went to the next bank, to the next, to the next, to the next, to sasfin... all declined. Declined despite orders, bank approvals of the client and all other things that could not have gone better. So what da hell is going on? What else can be done in order to convince a bank to lend me some money? I'm so annoyed right now.

I don't want to post the website here but if anyone is interested I'll pm it.

Anyone's got an idea what else I could do or should I just give up with the feeling that people like me won't get a chance in SA?

I am at a T-junction now where I have to decide if I'll keep on trying or go back home.

[Dave A]

I am at a T-junction now where I have to decide if I'll keep on trying or go back home.

If it's worth it, don't give up.

Have you tried getting credit from your supply side?
Or how about a deposit from the customer?

[NTS2011]

Have you tried Merchant Factor? http://www.mfactors.co.za/

[BusFact]

I can't provide any practical advice, but can perhaps explain why you aren't succeeding with the banks. They couldn't care less about your history of orders, outstanding orders or potential profits. They are not investors. They will only be interested in what assets you have that can act as collateral, so that the can sell them to get their money back if you don't repay the loan.

So if you have no significant assets worth well over the R450k, you are wasting your time at banks and hence your frustration. Your recent business success or future potential profitability is irrelevant to them.

Instead you need to find angel investors, venture capitalists or wealthy friends / family. Its no simple task. Alternatively be creative as per Dave's suggestions, but they too can be a challenge and have their limits.

The next way is to seriously analyse why you need R450k. Its most likely made up of nice-to-haves, instead of needs. You could probably trade (and I am guessing here not knowing the details) using a lot less. It might initially limit your sales or profitibility, but at least you can get going. Be ruthless and cut this high setup cost down.

[AndyD]

Venture capitalists would also be my advice but finance is something that rarely happens quickly, the reason these people have money to invest is because they're methodical as well as picky and choosy. Maybe consider approaching your main materials supplier with a view to a partnership or even a line of credit based on your firm orders.

[sterne.law@gmail.com]

Be creative.
Finance without the assets will always be a tough call. banks look for safety no matetr how much tehy advertise saying they are looking fro creativity.
Perhaps 150 perople with R3000 - offer a return on investment that is worth the risk. many ways to structure.
A South African movie is busy being financed like this, the public are putting teh money in.
Tsotise was financed to a certain extent liek this - I think the actors themselves were investors, cant quite remember.

[wynn]

Provided you are going to get paid immediately? get credit cards to the value you require from as many banks as you need to, just make sure you pay the minimum installment to avoid killer interest.
Skin the cat this way and provided you pay the banks back before the end of the month you may get away without paying any interest at all.

[Wolf]

If it's worth it, don't give up.

Have you tried getting credit from your supply side?
Or how about a deposit from the customer?

Those suppliers don't give credit, only cash before goods are released.

Customer has to pay 10% deposit but that doesn't change the problem.

[Wolf]

I can't provide any practical advice, but can perhaps explain why you aren't succeeding with the banks. They couldn't care less about your history of orders, outstanding orders or potential profits. They are not investors. They will only be interested in what assets you have that can act as collateral, so that the can sell them to get their money back if you don't repay the loan.

So if you have no significant assets worth well over the R450k, you are wasting your time at banks and hence your frustration. Your recent business success or future potential profitability is irrelevant to them.

Instead you need to find angel investors, venture capitalists or wealthy friends / family. Its no simple task. Alternatively be creative as per Dave's suggestions, but they too can be a challenge and have their limits.

The next way is to seriously analyse why you need R450k. Its most likely made up of nice-to-haves, instead of needs. You could probably trade (and I am guessing here not knowing the details) using a lot less. It might initially limit your sales or profitibility, but at least you can get going. Be ruthless and cut this high setup cost down.

You are right with what you say about the banks, they don't really care about whether I was successful in the past or not.

The 450k in this case only cover the import of 1 single unit, that's not cost for setup or anything, purely to finance the cost of import for this one item. I would probably be able to get orders for 2 or 3 units a month, so I'd need 3 times the money. However, if I could just start with 1 unit every 6 weeks it would be great. It takes about 5-6 weeks for one deal to finalize.

[Wolf]

Be creative.
Finance without the assets will always be a tough call. banks look for safety no matetr how much tehy advertise saying they are looking fro creativity.
Perhaps 150 perople with R3000 - offer a return on investment that is worth the risk. many ways to structure.
A South African movie is busy being financed like this, the public are putting teh money in.
Tsotise was financed to a certain extent liek this - I think the actors themselves were investors, cant quite remember.

Doesn't really work for this business since I need the cash to finance the import of a single item.

[Wolf]

Update: I was talking to my parents, they will go to the bank today. I hope this will work out, don't want to give up on this opportunity.

[BusFact]

Provided you are going to get paid immediately? get credit cards to the value you require from as many banks as you need to, just make sure you pay the minimum installment to avoid killer interest.
Skin the cat this way and provided you pay the banks back before the end of the month you may get away without paying any interest at all.

That was a technique that worked a while back when they were dishing out credit cards to everyone. Now with the new credit act, you have to list all your other debts and cards and they won't provide you with the credit card if you can't repay its full repayment along with the others from your monthly after expense income. Not too many of us can afford the monthly repayments on a R450k credit card bill.

[BusFact]

Update: I was talking to my parents, they will go to the bank today. I hope this will work out, don't want to give up on this opportunity.

What are they putting up as collateral? Life savings? Home? Please be super careful with this. If it goes wrong and they need this money, they're on the street.

If its a single item you're importing, can that not act as some of the collateral? Or is this item not easily resold by the bank if they had to?

[AndyD]

Yeah I agree putting your parents life savings into one big deal is maybe not where you want to go. At least get someone with relevant business experience to cast a beady eye over your plan. It's not always easy to see the pitfalls when your heavily involved in, or too close to something. A fresh pair of eyes and some unbiased viewpoints are always a good thing.

[Wolf]

I appreciate your worries about my parents but the deal is very safe. There is total loss insurance, deposit paid by the customer... and if anything supernatural should happen and the item explodes I could still cover the installments. I am not a youngster in business anymore either, I do have a lot of experience with international trading, however, 450k is still beyond my financing capabilities.

And the amount is also not so much that it would give my parents a headache, I probably should have done that in the first place. But you know, often you just wanna do things without mum and dad's help ;-)

I am 32 already, 10 years business experience, but you obviously never get too old to ask your parents for assistance.

Regarding the collateral, I was actually thinking the bank would use the imported item as collateral, the market value is about 550-600k, is not very difficult to sell, especially for 450k, but they say they don't use the financed good as its own surety. Totally not understandable for me but that's what they say.