Understanding!

Every so often I get enquiries about business funding. Very often they fall at the first fence by some basic misapprehension. It appears that everyone thinks their own good ideas are bound to be supported by everyone else and of course this is not so. 

At the back of my mind there is always the possibility of fraud or money laundering as well but where a genuine introduction is made the first tick in the box is there and we can proceed to examine the case.  

The latest one illustrates the point. It happens to be a large project enquiry but the same principles apply in some degree no matter what size or flavour it is. In this case I received a call from a colleague in Hampshire who introduced himself and said he had clients in Australia wishing to buy a substantial industrial complex involving a copper mine and wanted to raise funding. 

The first question springs up! Why raise money here when they are based and the project is based in Australia? The answer appears to be a difference in interest rates I am told. Well in the scheme of things the pricing and the interest rates are minor issues at this stage. So the query has started from the wrong direction. Like the Irish Directions - "I wouldn't go from here!" I am also told rthe facility is managed poorly and the new owners can do so much better.

At this point I know very little about the project and nothing about the clients, except that they are chasing a rainbow. The correct advice is to ignore the attraction of cheaper money elsewhere, raise the money locally, where they know the area, can go and see the project and can check the local clients easily. Argue for the best deal of course and take up the business. After a couple of years when they have proved it's a go-er they can look outside for a fresh approach to funding, bearing in mind the servicing of a foreign loan will be more expensive to manage. 

So what just happened here? With 3 basic facts at my disposal I already knew the whole thing was a non starter. I can extrapolate that and deduce some more about the clients and their advisers. The credibilty gap is there and incidentally the possibility of fraud has not been completely dismissed. 

Bob Shepherd Associates has many years experience of evaluating businesses. With a small new micro business or a large funding application the underlying rules have to be there and making sense. A gap in credibility or resources or people is going to show and if I can not mend the gap then others will see it too. The strategy and the credibility of the idea is the foundation on which the substance is built. Building business is what we do.