WHERE LOCAL BUSINESS GROWS

Financing from family and friends



Overview
 

You may want to ask relatives and friends for support when you need additional business funding.

This can work well, but often arrangements with family and friends are informal and based purely on trust and verbal assurances. Any confusion about the agreement could damage personal relationships, so it is important that both parties are clear about what any investment will involve. Think about whether you need a loan (for immediate, short-term funds) or want to take on an investor (for longer term or permanent funding).

The process
 

If you decide to accept a loan or investment from friends or family, you should approach it as if it were a formal finance deal.

This will involve:

  • presenting your business plan
  • preparing a business case
  • taking professional advice
  • creating a formal, written agreement
Before approaching a friend or family member, you should create or revise your business plan so you can demonstrate your plans for the business and their investment in it. Make your proposal with the same considerations as you would for any formal lender or investor. The friend or relative will need to know how their money will be used and the bigger picture for your business. Make them aware of all risks and worst-case scenarios.

You need to make a business case that will persuade them to finance your business instead of their own personal plans.

Sources of help

You should both get professional advice if the amounts involved are substantial. This will help you both consider factors objectively, without feeling under pressure and to reach a decision that you feel comfortable with. Many accountants will also advise on the issues and will draw up an agreement.

If you both agree to proceed, formalise the arrangement with a written agreement. This will help prevent future misunderstandings and provide a solid basis for the business relationship.

A loan agreement should cover the loan size and terms, the repayment plan and interest rates. Investment agreements are more complex and should include the amount invested, the allocation of profits and shares, roles and responsibilities of both parties and a repayment schedule. You should seek professional advice to help you draft any written agreements.

Pros and cons
 

Pros

  • they may be more flexible than other lenders
  • they may offer loans without security or accept less security than banks
  • they may lend funds interest-free or at a low rate
  • they may agree to a longer repayment period or seek a lower return on their investment than formal lenders
  • they know your character and circumstances
Cons
  • misunderstandings can damage the relationship
  • there is a risk your investors may offer more than they can afford to lose, or that they will demand their money back when it suits them and not your business
  • they may want to get more involved in the business, which may not be appropriate

Common mistakes
 

It may be tempting to have an informal agreement with your friends or family who are financing your business, but this can lead to confusion. To avoid any future issues, you should:

  • Be clear about your own expectations - specify how long you need the money for
  • Detail the repayment level you can afford
  • Spell out how many shares or what profit the investor will receive - and when any returns will be paid
  • Clarify whether an investor will have any financial liabilities for your business activity
  • Draw up a formal written agreement
  • Think twice about approaching a friend or family member if other sources of finance have turned you down
  • Analyse the reasons for this and review your business proposition. Remember that if your business fails, lenders and investors may lose their money
  • Pass on the reasons that others gave for turning you down

Funding sources
 

Family and friends that have some extra money and experience in business may be good sources of finance, especially if you are just starting up. You may want to consider publishing your pitch on a crowdfunding website – this can be a way of raising funds from family and friends without the embarrassment of having to ask in person.

If you can’t find friends or family to loan you money or become investors in your business, you may want to consider other sources of finance.

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Yorkshire businesses get behind £10k fundraising campaign

Tuesday 04 April 2017

As preparations for the charity football initiative ‘The Match 2017’ continue to gain momentum, the latest supporters to get on board are Huddersfield-based businesses Magic Rock Brewing and Lindley Financial Management. The inaugural event, which will take place on Saturday 20th May at The MBI Shay Stadium in Halifax, will bring together footballing amateurs and Huddersfield Town legends, in a game that will help to raise much needed funds for Yorkshire Air Ambulance. Both firms have dug deep for the cause, and have each donated £500 in return for becoming an official shirt sponsor. With a running cost of £12,000 per day for the two yellow helicopters to remain active, the organisation relies entirely on donations to continue saving lives. And now further support is required to keep The Match proceeds growing, and help this initiative reach its £10,000 target. Magic Rock Brewing was founded by brothers Richard and Jonny Burhouse and inspired by brewing traditions and the US craft beer scene in particular. The award-winning and ever-growing company produces an innovative range of idiosyncratic beers in their 4,000sqft Tap Room, close to the town centre. When approached via social media and asked to get behind The Match, Richard says there was never any doubt about getting involved: “We are a community focused business, keen to support local initiatives wherever possible. We are aware of the excellent work the air ambulance does for the region, and wanted to do our bit.” Regular charity supporters Lindley Financial Management also had no qualms about signing up to help the event. The independent financial advisers, based in Brighouse, also support Pilgrim Bandits Charity, aiding soldier amputees injured in Iraq and Afghanistan. Commenting on The Match, director Mark Learmont, said: “I hope as many people as possible attend on May 20th. Nobody knows when they may need the help of the Yorkshire Air Ambulance – supporting them is vital and their services must be applauded.” Organiser, and founder of grassroots football specialists Coaches Club, Dave Learmont, adds: “I am so thankful that two local businesses have gone the extra mile to raise awareness and proceeds for this fantastic charity. 100% of all funds donated will go to Yorkshire Air Ambulance, and these shirt sponsorships put us well on our way to hitting our huge target.” But the search for sponsors isn’t over, with the players themselves now looking for individual support. For only £150, companies will secure their name and details on the official match website, alongside their logo on the programme. The players and Town legends are also appealing for members of the public to get on board and buy tickets. Available at £10 for adults and £5 for children, the aim is to provide a fun, low cost day out for all the family. Pre-match and half-time entertainment – as well as a couple of extra special guests – will be revealed over the coming weeks. All tickets must be purchased before the game, via justgiving.com/teams/coaches-club. Further information and updates about The Match and player sponsorship can be found at The Coaches Club website, and on Twitter @cccmatch.
Posted by Scriba PR
Vizulate becomes Approved Supplier on Digital Enterprise scheme

Friday 10 March 2017

Vizulate Digital is delighted to announce that we have been named as an approved supplier on the Leeds City Region Digital Enterprise scheme, which allows eligible small and medium sized businesses across Yorkshire to ‘Invest in Digital’. Running until March 2019, the Digital Enterprise scheme aims to support the growth and development of SMEs in the region through investment in digital skills and technology. Eligible businesses will be able to apply for 40% funding towards the cost of digital projects including digital marketing, social media, web design and development, e-commerce and more – up to a maximum of £5,000. The Digital Growth Vouchers could also fund part of the cost of technology upgrades such as IT and telecoms and, if approved, the business will then only have to cover the remaining 60% of the cost. The Digital Enterprise scheme is a partnership programme which is partly funded by the European Union (European Regional Development Fund), the West Yorkshire Combined Authority/Leeds city region Local Enterprise Partnership (LEP) and the 9 local authorities which form part of the Leeds city region – Leeds, Calderdale, Kirklees, Bradford, Selby, Craven, Harrogate, York and Wakefield. As approved suppliers on the Digital Enterprise scheme with over 10 years’ experience we are able to offer the full range of digital services including: Website Design & Development E-Commerce Digital Marketing Social Media Search Engine Optimisation (SEO) Online Advertising (Google AdWords, Facebook Ads etc.) Video & Animation Integrated Digital Solutions Web Hosting & Email Through our trusted partners we can also provide IT and telecoms solutions. We believe digital marketing represents the single biggest opportunity for businesses to achieve growth.
Posted by Vizulate Digital
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Business Hub Live - Innovation and Research & Development
Wednesday 24 May 2017, 08:30 - 10:30
Firth Street, Huddersfield, HD1 3BD
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