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.
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 dilapidated property at auction to renovate and sell on
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.
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.
4. Change a building's use
As society changes, its buildings need change, too.
Redundant pubs, churches, chapels, schools and post offices are high on the list of buildings ripe for 'Change of Use' permission from the local authority. For those who acquire such a building and get permission to use it for residential, commercial, industrial purposes or a purpose other than its current use, a profit can be made.
The buyer won't necessarily have to be the one who physically makes the change from, say, pub to office, or post office to restaurant, but they will need to own the property.
Local authorities and heir planning officers are often keen to see obsolete buildings put to new uses in this way. They'll probably be quite helpful.
More often than not, 'Change of Use' can mean change of value, too – upwards. Bridging finance can help the acquirer profit from being the agent of change.
5. Buy art and antiques to sell on
This kind of speculative trading activity is fine if you're an expert – or have deep pockets and experts to advise you.
‘Commodities' might be other sorts of assets, like classic cars, sporting memorabilia, books or coins. Buying and selling such items can be good business if the speculator is well-informed.
Building a solid long-term relationship with a short-term financier will certainly open the door to this kind of ongoing activity. As the trader gets more successes under his or her belt, the amount of finance available for the 'trades' can increase.
Of course, there are countless other types of opportunity out there, depending on local and regional circumstances, location or the interests and ambitions of the individual.
The advice is simple for anyone who finds themselves staring a genuine business opportunity in the face:
1. Carefully calculate all the costs that the venture will incur;
2. Take a realistic view of the exit or selling price that might be achieved;
3. Consult a professional adviser who can offer a view of the viability of the project and point you in the direction of the finance to fund it;
4. Grit your teeth, spread your wings and prepare yourself for plenty of hard work.
