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

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

    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.

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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by Wolf View Post
    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?

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    Quote Originally Posted by Dave A View Post
    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.

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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by Wolf View Post
    Those suppliers don't give credit, only cash before goods are released.
    Then perhaps you should be treating your clients in similar manner?

    That said, I do understand there's a difference in payment terms (or the lack of it) when it comes to importing. But ultimately your potential client would face the same hurdle, surely.

    EDIT: I see you've made a plan. Not ideal, but as long as it all works out...
    Sounds like you've done as much as you can to mitigate risk though.

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

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    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.

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    Quote Originally Posted by BusFact View Post
    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.

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    SO BusFact is saying that 'if you have no significant assests worth well over R450K' you don't stand a chance in hell of acquiring a loan/bridging finance and the likes from banks? Well here is the thing - I have assests well over that. I am applying to take out the excess money that I have paid into my home loan and to take the homeloan back up to the original contract price but I have been declined? What the hell?? My homeloan is actually in advance, I have never missed one payment and now I have to supply them with my great grandmother's uncle's DNA! I have resided in the same property for over 20 years, do not have credit other than the homeloan and the usual utility bills- oh IS THAT my problem? I don't have any traceable credit, I don't owe thousands to any creditors? Can somebody tell me what needs to be done here? I have supplied the bank with a set of financials for the period 1 March 2010 to 28 Feb 2011, income and expense statement for the last 3 months,e a projected income and expense statement for the next 6 months, salary slips, bank statments - what the hell else do they need from me? Now they are calling for my drawings.........a sole proprietor..... my expenses ARE my drawings!

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    Diamond Member AndyD's Avatar
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    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.
    _______________________________________________

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    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.
    Anthony Sterne

    www.acumenholdings.co.za
    DISCLAIMER The above is merely a comment in discussion form and an open public arena. It does not constitute a legal opinion or professional advice in any manner or form.

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