Funding - Working Capital - Advice..

PatWilson

Hi, Currently looking for funding from the banks..
Operating a retail store..
2017 Turnover - 190K
2018 Turnover - 220K
2019 Jan-May - 130K
Our projections based on monthly income percentages/growth are looking at around 512K for 2019..

So we have a couple of problems..
- We are running this off a 5K overdraft..
- We are way understocked to compete with competition..
- We are under staffed


For us to get fully stocked, we need about a 60K order, and we will be will be hitting KPIs that would result in a turnover of €1.2M

At the minute, were basically turning enough each week to pay running costs and purchase the same stock amount..

Just wondering if anyone has any advice regarding the best way for us to get funding..
Would be looking for about 100K..

Thanks in advance..

jimmii

Standalone I would imagine it would be hard to raise much via a bank. You would probably need to have some assets to use as security whether that be in the business or personally. What's led to the sudden growth spurt? If you're going to do your 2018 turnover by the middle of the year it looks like things are going in a good direction already surely that extra cashflow allows you some spare to invest it into new stock/staff?

We had our Dublin shop up to around 750 and even then the banks weren't offering up much other than overdrafts really. Business I'm involved with now turnover is low 7 figs and getting 200k was a lot of work even though it's been trading 20 years!

PatWilson

jimmii wrote: »

Standalone I would imagine it would be hard to raise much via a bank. You would probably need to have some assets to use as security whether that be in the business or personally. What's led to the sudden growth spurt? If you're going to do your 2018 turnover by the middle of the year it looks like things are going in a good direction already surely that extra cashflow allows you some spare to invest it into new stock/staff?

We had our Dublin shop up to around 750 and even then the banks weren't offering up much other than overdrafts really. Business I'm involved with now turnover is low 7 figs and getting 200k was a lot of work even though it's been trading 20 years!

The reason sales are up this year is because we expanded with another store, so running costs went up a lot which is why we’ve plateaued, so basically the amount of stock we turn each week, is only covering running costs and to purchase the same amount of stock..
We would need 80-100K to be able to hit that €1M..

Also, the KPI’s to hit €1M are fairly straightforward but just we need the capital..

With our current figures for the past 2 and a half years, does anyone have any idea what sort of funding we would be able to get, overdraft/loan..

Cheers

jimmii

PatWilson wrote: »

The reason sales are up this year is because we expanded with another store, so running costs went up a lot which is why we’ve plateaued, so basically the amount of stock we turn each week, is only covering running costs and to purchase the same amount of stock..
We would need 80-100K to be able to hit that €1M..

Also, the KPI’s to hit €1M are fairly straightforward but just we need the capital..

With our current figures for the past 2 and a half years, does anyone have any idea what sort of funding we would be able to get, overdraft/loan..

Cheers

The banks tend to look over a 3 year+ stretch so while it will be weighted towards the current sales your historical sales will also be taken into account which won't help. They're still very wary of anything high street you can see how they view physical locations by the number they're closing. If you can put up some security and show a dam solid business plan you might get closer to the number you want. It would need to be bullet proof.

You'll definitely be able to get a chunky loan or overdraft but you won't find out what here you'll only find out from the bank!

antoinolachtnai

What you are asking for is finance for stock for a retail business. Banks are going to be really reluctant to finance stock for a retail business.

The particular problem is the figures you are presenting. It is great that you are growing turnover, but the question that really matters is what is the EBITDA? Am I to take it from what you've said that the EBITDA is 0 (i.e., inward cashflow is equal to outward cash, which means you are losing money when depreciation is taken into account)?

And what do you think you can increase the EBITDA to if you if you get the extra credit? This is really the key thing.

Even if you find a sympathetic ear, and even if you have a brilliant plan, it is going to be very hard for the bank to convince itself to fund a business which isn't currently profitable, without someone else also putting in funding and taking a greater risk than the bank is being asked to take.

Is there any way you can get your suppliers (or alternative suppliers) to give you 60 or 90 days credit? Even if it meant a price increase of 3 percent or more, this could give you the funding you need.

(Assuming here that your gross margin is 50 percent, then a year's turnover at €1m needs €.5m of stock, which means 60 grand of stock is about 1.5 months of stock.)

If you can't get the suppliers to finance at least something in this way (and if they won't do anything for you, the bank and prospective investors will be wondering why not) I think you are going to have to bring in some form of equity finance. You need to find someone who understands your business to put this money in. The problem is that the equity investor will be a lot more demanding in terms of return.