Purchasing an expensive asset that you need for your business doesn’t have to hold you back or be an impossibility. Whilst for you that could be anything from a printing press to a car or even a commercial building, whatever the challenge, there’s always a way as long as you have the will!
Let’s look at some of the ways my customers have raised finance to buy one of our ovens to get their business off the ground. And I’m sure you’ll agree there is no doubt that there’s been massive growth and interest in real wood fired ovens along with the pizzas that are cooked in them, and that the real wood fired oven revolution is now in full swing.
About time!!!
That said, there are still a huge amount of people who are shocked when they enquire about the price tag associated with a high-quality oven. That price tag can be prohibitive so owning one is still very much an elitist thing.
But it need not be so.
Over the years I have personally helped 100’s of people enter the market. For many the investment seemed a gamble, but on reflection it became a life changing event and, in the overwhelming majority of my customers, this has been a positive thing.
In the past, taking the leap has been akin to extending the mortgage, or enduring the eye watering interest rates associated with a credit card purchase, or suffering the uncomfortable encounter with a less than receptive bank manager.
But enduring this was worth the hassle as the rewards, when calculated correctly, can be astronomical.
Now I’m going to have to be straight; I’m not a financial advisor so don’t put your life savings at risk or dive into a long term re-payment scheme without making sure that you have taken proper legal advice from a registered financial advisor before embarking on extending a line of credit.
So, rather than give you the facts and figures associated with repayment percentages and margins or the nitty-gritty of who owns an asset and at what point it becomes yours, I’ll concentrate on and share with you stories of how some of my customers have financed their business and the purchase of an oven to get their dreams off the ground.
Many of them have gone on to win awards and become the best in the industry and celebrated in their regions for outstanding produce.
Friends & Family
I remember one of the first mobile ovens I sold was to a crew of Italians who were setting up for the festival scene and, having put down a deposit, I made their oven on a trailer. Come collection day they arrived with no fewer than 10 different credit and debit cards and a whole host of parents, friends and family. It took over 2 hours to process all the cards at different values, but before handing over the trailer, I thought it prudent to get a copy of a passport. . . It’s fair to say I was worried.
The customer has gone on to be very successful and in total had 3 ovens off me. Friends and family investing in your business is one way of getting some unsecured finance; low risk to you and spread wide so as to not be a burden to any individual.
Credit Card
I also remember a young lady coming to see me about 8 years ago; she had a real passion and wanted to change her life. Unfortunately she had no one to turn to, no one to support her, but was determined to make it work: ‘private parties at an affordable price for everyone’ was her angle.
She paid for the whole trailer on a credit card then went hell for leather to get it paid off as soon as possible. Her business has also been a huge success and the high interest rate was a real incentive to get out there and get stuff done and pay it off quickly.
Cash Purchase
I have, however, also had customers who have sold businesses and used the money from the sale of the business they no longer enjoyed running to set up something new and fresh.
But I must warn you that buying an oven outright and owning one is not the same as running the business; I’ve had many customers who have purchased outright only to go on and get average returns. I believe that getting a bill once a month to pay off encourages you to get off your arse and get stuff done; work begets work.
On the whole, access to finance is a lot easier than it was 20 years ago.
Bank Business Loan
You could take out a business loan with the bank, but, having sought financial support from the high street banks several times, I personally find high street banking a complete joke; months to set up accounts, forever changing bank managers, and managers who have no real understanding of business at all. So, should you decide to approach the bank and they say no, don’t give up; just because your bank said no doesn’t mean that every bank will say no.
I recollect when I first started my business, I had to approach loads of them, after all, who in their right mind would have ever thought that making pizza ovens in the UK would be good business!
Bank managers, in the main, have targets to achieve and seem not to know anything about setting up or running a business but are more interested in seeing if the gearing is acceptable to the computer model. Our businesses, street food catering and restaurants, don’t conform to the norm of profitability and just don’t seem to fit their computer model.
Asset Finance
So instead, for bigger purchases, I’ve found asset finance to be a much easier prospect with lower interest rates than credit cards or bank loans. Sometimes I’ve managed to get the loan secured against the asset with a deposit paid, other times I’ve had to give assurances for low incomes and new businesses.
There are so many asset finance brokers now that it’s mostly actually quite easy to get a loan of sorts; if you are considered a higher risk, then the repayments are steeper, but you still have freedom to choose.
Funding Circle
There is also the growing trend towards crowd source funding. Loads of people have gone on to build successful businesses with finance raised through these platforms and, much to the surprise of many, you don’t have to give away equity in your business, some platforms you simply pre-sell your product at a discounted price.
Passion, a good video and story seem to be key. In the research that I have done so far, it would also appear that you need to have your ducks in line before you launch, in other words you need to have lots of people willing to back you, and you need to almost have all the funds committed already by a network of supporters and their friends. The platform then is just a formal way of them committing the funds.
There are loads of different platform types: some where you give away equity, others where you give away products or service.
So, you really need to dive into these sources to find a platform that works best for you.
There is also the government backed system funding circle; you may have seen them on the TV. I have used this myself and found the process relatively easy, but be warned, they claim very low rates on TV, I’ve never heard of anyone who got rates like that. They also say ‘unsecured loans’, so be careful because when you get the loan you will, in most cases, have to promise to pay it back and whilst they don’t formally attach your assets to the loan, they still require you to give a personal guarantee which could mean your assets.
The one thing that I have learned over the years is that you need to know the figures before you go in search of funds. Make sure you have a robust business plan with a good understanding of what revenues you can expect and what the breakeven figures are going to be.
Always have 3 scenarios:
- A breakeven model which must be easily achievable and appear to be a no-brainer.
- A higher figure which is most likely to be your average trading.
- and a blue sky thinking kind of project.
And you must know your figures inside out, with the answers to hand.
If someone is going to lend you money they will want to know that you have a good handle on the figures. If you don’t believe me, check out a couple of Dragon’s Den programs and see how applicants who don’t know the numbers get sliced and diced by the panel.
No, it’s quite easy: – be prepared and have the facts to hand.
The only thing getting sliced should be the fresh hot pizza from your premium wood fired oven served to your eager customers at that premium commanding price-point.
