Q: I run a restaurant, which I opened with a loan from my brother-in-law at normal interest rates. I would now like to open a takeaway too, how can I raise money to do this and be fair to my brother -in-law at the same time?
Aug 17 2005
Answered by: Clive Lewis Ask a question
There’s a lot that’s left unsaid in this query, so I will have to make some assumptions. Reading between the lines, it sounds to me like you’ve found the first business tough-going and you’ve spotted a different opportunity and to you the grass looks greener. Well, let me tell you, in business the grass is never greener. The simplistic idea of the man who hit town with sixpence, looked around and said ‘What this town needs is power stations, I’m going to build power stations’ and within a short space of time he’s a millionaire is plain garbage. I instantly distrust anyone who says that their business success came very easily. There are no easy options. So you need to be very careful before you abandon one business idea to adopt another one.
Alarm bells are also ringing because you’ve been lent money by your brother-in-law. I think he could take a pretty dim view of you borrowing more money from somewhere else and starting another business. Relationships between investors, lenders and business owners can be strained at any time, but cracks can become gorges if someone thinks they are being unfairly treated. I have myself experienced how difficult it can be if a business is struggling and two of the shareholders/lenders fall out. You just don’t stay friends. So is that what you want to happen with your brother-in-law? As a general rule, borrowing or seeking an investment from the family should be your second choice of finance, not the first.
Your current proposition in any case would not look appealing to another lender. It is possible to borrow money from a bank under the Small Firms Loan Guarantee Scheme if you don’t have any security (such as your house) to back up your loan. But I don’t think you’ll get any takers from the banks. Bankers would be unhappy with the existence of the first loan and your apparent lack of success with your first business idea. Your only real solution if you are determined to press ahead would be to turn your business into a limited company and look for an investor (possibly a business angel) willing to put money into your new venture. But of course you must come clean about the existing loan to your brother in law.
Comments