# General Business Category > Business Finance Forum >  Confirmed orders, approved finance, still no loan from the banks

## Wolf

So I started this business idea, putting a beautiful website online to test the waters. It went surprisingly well, a lot of interest, and my first sale after not even 2 weeks, the business could have made a million rand turnover after not even 4 weeks of operation, 2500 visits on the website, google budget was exhausted every single day. 

So after the first sale was signed by the customer and approved by his bank I went to my bank to get a bridging finance of 450.000 for 6 weeks time.... declined....

I went to the next bank, to the next, to the next, to the next, to sasfin... all declined. Declined despite orders, bank approvals of the client and all other things that could not have gone better. So what da hell is going on? What else can be done in order to convince a bank to lend me some money? I'm so annoyed right now. 

I don't want to post the website here but if anyone is interested I'll pm it. 

Anyone's got an idea what else I could do or should I just give up with the feeling that people like me won't get a chance in SA?

I am at a T-junction now where I have to decide if I'll keep on trying or go back home.

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## Dave A

> I am at a T-junction now where I have to decide if I'll keep on trying or go back home.


If it's worth it, don't give up.

Have you tried getting credit from your supply side?
Or how about a deposit from the customer?

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## NTS2011

Have you tried Merchant Factor?  http://www.mfactors.co.za/

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## BusFact

I can't provide any practical advice, but can perhaps explain why you aren't succeeding with the banks. They couldn't care less about your history of orders, outstanding orders or potential profits. They are not investors. They will only be interested in what assets you have that can act as collateral, so that the can sell them to get their money back if you don't repay the loan.

So if you have no significant assets worth well over the R450k, you are wasting your time at banks and hence your frustration. Your recent business success or future potential profitability is irrelevant to them.

Instead you need to find angel investors, venture capitalists or wealthy friends / family. Its no simple task. Alternatively be creative as per Dave's suggestions, but they too can be  a challenge and have their limits.

The next way is to seriously analyse why you need R450k. Its most likely made up of nice-to-haves, instead of needs. You could probably trade (and I am guessing here not knowing the details) using a lot less. It might initially limit your sales or profitibility, but at least you can get going. Be ruthless and cut this high setup cost down.

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AndyD (24-Mar-11)

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## AndyD

Venture capitalists would also be my advice but finance is something that rarely happens quickly, the reason these people have money to invest is because they're methodical as well as picky and choosy. Maybe consider approaching your main materials supplier with a view to a partnership or even a line of credit based on your firm orders.

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## sterne.law@gmail.com

Be creative.
 Finance without the assets will always be a tough call. banks look for safety no matetr how much tehy advertise saying they are looking fro creativity.
Perhaps 150 perople with R3000 - offer a return on investment that is worth the risk. many ways to structure.
A South African movie is busy being financed like this, the public are putting teh money in.
Tsotise was financed to a certain extent liek this - I think the actors themselves were investors, cant quite remember.

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## wynn

Provided you are going to get paid immediately? get credit cards to the value you require from as many banks as you need to, just make sure you pay the minimum installment to avoid killer interest.
Skin the cat this way and provided you pay the banks back before the end of the month you may get away without paying any interest at all.

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## Wolf

> If it's worth it, don't give up.
> 
> Have you tried getting credit from your supply side?
> Or how about a deposit from the customer?


Those suppliers don't give credit, only cash before goods are released. 

Customer has to pay 10% deposit but that doesn't change the problem.

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## Wolf

> I can't provide any practical advice, but can perhaps explain why you aren't succeeding with the banks. They couldn't care less about your history of orders, outstanding orders or potential profits. They are not investors. They will only be interested in what assets you have that can act as collateral, so that the can sell them to get their money back if you don't repay the loan.
> 
> So if you have no significant assets worth well over the R450k, you are wasting your time at banks and hence your frustration. Your recent business success or future potential profitability is irrelevant to them.
> 
> Instead you need to find angel investors, venture capitalists or wealthy friends / family. Its no simple task. Alternatively be creative as per Dave's suggestions, but they too can be  a challenge and have their limits.
> 
> The next way is to seriously analyse why you need R450k. Its most likely made up of nice-to-haves, instead of needs. You could probably trade (and I am guessing here not knowing the details) using a lot less. It might initially limit your sales or profitibility, but at least you can get going. Be ruthless and cut this high setup cost down.


You are right with what you say about the banks, they don't really care about whether I was successful in the past or not. 

The 450k in this case only cover the import of 1 single unit, that's not cost for setup or anything, purely to finance the cost of import for this one item. I would probably be able to get orders for 2 or 3 units a month, so I'd need 3 times the money. However, if I could just start with 1 unit every 6 weeks it would be great. It takes about 5-6 weeks for one deal to finalize.

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## Wolf

> Be creative.
>  Finance without the assets will always be a tough call. banks look for safety no matetr how much tehy advertise saying they are looking fro creativity.
> Perhaps 150 perople with R3000 - offer a return on investment that is worth the risk. many ways to structure.
> A South African movie is busy being financed like this, the public are putting teh money in.
> Tsotise was financed to a certain extent liek this - I think the actors themselves were investors, cant quite remember.


Doesn't really work for this business since I need the cash to finance the import of a single item.

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## Wolf

Update: I was talking to my parents, they will go to the bank today. I hope this will work out, don't want to give up on this opportunity.

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## BusFact

> Provided you are going to get paid immediately? get credit cards to the value you require from as many banks as you need to, just make sure you pay the minimum installment to avoid killer interest.
> Skin the cat this way and provided you pay the banks back before the end of the month you may get away without paying any interest at all.


That was a technique that worked a while back when they were dishing out credit cards to everyone. Now with the new credit act, you have to list all your other debts and cards and they won't provide you with the credit card if you can't repay its full repayment along with the others from your monthly after expense income. Not too many of us can afford the monthly repayments on a R450k credit card bill.

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## BusFact

> Update: I was talking to my parents, they will go to the bank today. I hope this will work out, don't want to give up on this opportunity.


What are they putting up as collateral? Life savings? Home? Please be super careful with this. If it goes wrong and they need this money, they're on the street.

If its a single item you're importing, can that not act as some of the collateral? Or is this item not easily resold by the bank if they had to?

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## AndyD

Yeah I agree putting your parents life savings into one big deal is maybe not where you want to go. At least get someone with relevant business experience to cast a beady eye over your plan. It's not always easy to see the pitfalls when your heavily involved in, or too close to something. A fresh pair of eyes and some unbiased viewpoints are always a good thing.

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## Wolf

I appreciate your worries about my parents but the deal is very safe. There is total loss insurance, deposit paid by the customer... and if anything supernatural should happen and the item explodes I could still cover the installments.  I am not a youngster in business anymore either, I do have a lot of experience with international trading, however, 450k is still beyond my financing capabilities. 

And the amount is also not so much that it would give my parents a headache, I probably should have done that in the first place. But you know, often you just wanna do things without mum and dad's help ;-)

I am 32 already, 10 years business experience, but you obviously never get too old to ask your parents for assistance. 

Regarding the collateral, I was actually thinking the bank would use the imported item as collateral, the market value is about 550-600k, is not very difficult to sell, especially for 450k, but they say they don't use the financed good as its own surety. Totally not understandable for me but that's what they say.

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## Justloadit

> Regarding the collateral, I was actually thinking the bank would use the imported item as collateral, the market value is about 550-600k, is not very difficult to sell, especially for 450k, but they say they don't use the financed good as its own surety. Totally not understandable for me but that's what they say.


It is simply because of the fact that they do not know who the equipment belongs to. So using the equipment as collateral may have a problem that the ownership is  not yours until certain conditions are met, which would put the bank at risk in the case of a non repayment of the loan. Secondly, the bank deals in money, not trading in goods. IN the case the deal goes sour, it now makes the bank responsible for getting it's own money back.
w
hat we tend to forget is that the bank trades in money as it's stock.

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## Wolf

> It is simply because of the fact that they do not know who the equipment belongs to. So using the equipment as collateral may have a problem that the ownership is  not yours until certain conditions are met, which would put the bank at risk in the case of a non repayment of the loan. Secondly, the bank deals in money, not trading in goods. IN the case the deal goes sour, it now makes the bank responsible for getting it's own money back.
> what we tend to forget is that the bank trades in money as it's stock.


Ownership is mine because I have to pay upfront, however, it is true that they are trading with money. On the other hand, it would be my responsibility to get them their money by either keep on paying the installments and/or finding another buyer for the good, which is not more difficult than selling a car or anything worth 450k. 

Since the buyer has paid a 10% deposit and finance is in place and approved by his bank, what intention would he have to cancel the deal and lose his deposit? The worst thing that could happen is that the buyer dies before the good is delivered. But then I still have the deposit AND the good, AND I am able to settle the installments.

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## Justloadit

> Ownership is mine because I have to pay upfront, however, it is true that they are trading with money. On the other hand, it would be my responsibility to get them their money by either keep on paying the installments and/or finding another buyer for the good, which is not more difficult than selling a car or anything worth 450k. 
> 
> Since the buyer has paid a 10% deposit and finance is in place and approved by his bank, what intention would he have to cancel the deal and lose his deposit? The worst thing that could happen is that the buyer dies before the good is delivered. But then I still have the deposit AND the good, AND I am able to settle the installments.


We tend to forget, the bank deals in money. All decisions are based on money. They are not in the business of selling equipment.

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## Dave A

> Those suppliers don't give credit, only cash before goods are released.


Then perhaps you should be treating your clients in similar manner?

That said, I do understand there's a difference in payment terms (or the lack of it) when it comes to importing. But ultimately your potential client would face the same hurdle, surely.

EDIT: I see you've made a plan. Not ideal, but as long as it all works out... 
Sounds like you've done as much as you can to mitigate risk though. :Thumbup:

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## Wolf

I made sure the risks are reduced to a minimum. It will all show hopefully today if it will work out. In business you have to take risks sometimes. As long as you don't ignore that and make sure about things it will all be good. My father has been in international trading his whole life, if he weren't sure it's all planned properly he wouldn't get involved.

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## Wolf

My parents will get the results on Monday, please hold thumbs for me!

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## Blurock

In the USA businesses use Purchase Order Finance in a situation like this. All they need is a confirmed order from a reliable purchaser to make it a self-liquidating transaction. Very often in South Africa an opportunity is missed because of lack of working capital and the reluctance of banks to assist SME's (despite their fanfares at the start of every financial year).
Purchase Order Finance considers the repayment ability of the purchaser (Debtor) and relies on the integrity of the supplier as well as the debtor. The transaction is very much like a trade finance deal where the purchaser gives confirmation of an irrevocable order. The financier or bank will take ownership of the goods purchased and manage/control the import end to end with delivery directly to the purchaser. 
The purchaser (debtor) pays the financier on receipt of the goods and the mark up (profit) of the transaction is paid to the supplier after deduction of fees and interest. :Online2long: 
When approaching a bank, it is of no use talking to someone at your local branch. Approach the business banking section and make sure that they understand what you are talking about. If you do not speak to the right people, you will never get the right answers. There are some private companies and investors that may be able to assist in this regard.

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AndyD (25-Apr-11)

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## Jenfor

SO BusFact is saying that 'if you have no significant assests worth well over R450K' you don't stand a chance in hell of acquiring a loan/bridging finance and the likes from banks? Well here is the thing - I have assests well over that. I am applying to take out the excess money that I have paid into my home loan and to take the homeloan back up to the original contract price but I have been declined? What the hell?? My homeloan is actually in advance, I have never missed one payment and now I have to supply them with my great grandmother's uncle's DNA! I have resided in the same property for over 20 years, do not have credit other than the homeloan and the usual utility bills- oh IS THAT my problem? I don't have any traceable credit, I don't owe thousands to any creditors? Can somebody tell me what needs to be done here? I have supplied the bank with a set of financials for the period 1 March 2010 to 28 Feb 2011, income and expense statement for the last 3 months,e a projected income and expense statement for the next 6 months, salary slips, bank statments - what the hell else do they need from me? Now they are calling for my drawings.........a sole proprietor..... my expenses ARE my drawings!

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## Dave A

Banks have always been a bit otherwise when it comes to personal finance for sole proprietors  :Frown: 
I'm not sure why exactly, but I suspect it's because it messes up the risk evaluation formulas.

My suggestion - convert to a company to get the business side out of your personal finances.

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## Blurock

Hi Wolf.Forward me your website and I will see what I can do.

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## Nigel Hamilton

> Hi Wolf.Forward me your website and I will see what I can do.


Yes likewise... I am ready to invest in a new business venture

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