By Chris Baguley, MD of Bridging Finance
People often seek professional advice about speculative proposals that they believe could make them money, if only they had funds to turn their ideas into action.
Professional advisers are accustomed to being approached by clients who believe they've stumbled across a business idea that is the greatest thing since sliced bread.
These approaches often come from otherwise cautious individuals who bemoan their inability to fund the opportunities that have come their way. They describe the chicken and egg scenario: “how can I make any money without sufficient capital in the first place?”
The answer is that there is always an abundance of opportunities for those prepared to seek them out.
The sensible course of action, for those with sufficient appetite to seize these opportunities, is to seek professional help to find the funds.
There is always money in the market looking for a good home. Funds are always available to those whose credit standing is good, who are prepared to provide adequate security and whose business proposal stacks up.
Funds are always available to those whose credit standing is good, who are prepared to provide adequate security and whose business proposal stacks up
Professionals who can point entrepreneurs in the direction of the facilities they need will, of course, benefit from doing so. Most accountancy firms, solicitors, surveyors, architects and so forth, maintain firm connections with funding providers.
Short-term financiers often advance funds to support sound business proposals at the formative stage. Their interest rates are often a monthly rate and structured to take into account the shorter repayment term.
But remember, lower-rate conventional funding can usually be found to replace the short-term funding once the proposal begins to take shape.
Here are just a few examples of the kind of money-making ideas that can come to fruition with the help of short-term funding:
1. Buy a property, renovate and sell
There are lots of bargains to be had at well-advertised property auctions – but the catch is that you have to complete the purchase more or less immediately. Banks and building societies move slowly and don't like taking risks.
The answer is to pre-arrange finance with a firm that specialises in this kind of transaction. In effect, after using available resources (or cash you've raised against your assets) you have to pay the deposit.
2. Buy a business
If someone has accumulated in-depth knowledge of a particular industry over the years and thinks they could run a business in it, it might be advisable to do something about it.
There are always plenty of businesses for sale as the owners elect to change direction, suffer ill health, move abroad or retire.
With short-term funding an entrepreneurial individual might be able to negotiate a really good deal that puts him or her in the driving seat.
Once in control of the business they'll be in a position to negotiate a favourable longer-term funding package with conventional lenders.
3. Knock a house down
This is another 'chicken and egg' situation.
Because land in desirable suburban areas has become so difficult to acquire, many buildings of scant architectural merit - mostly built in the fifties and sixties – are worth less than the plot they stand on. If a speculator buys such a property, gets planning permission to demolish and rebuild, and finds a builder or developer who will buy the bare plot for more than was paid for it, there are good returns to be made.
The trick is to check both the going rate for local development land and area planning policy beforehand. Again, short-term finance is the answer, using the acquired land as collateral. Plenty of professional help and advice will be essential, of course, for the inexperienced.
