finding funding to buy a business

**jmarshall** · 05-01-2011 05:48 PM

How many of us have missed out on opportunities because of lack of funding? Even after the taxpayers bailed out the big banks, we still can't get financed, especially for operating expenses. Even the SBA makes you jump through hoops. This is the problem I have run into anyway, and I'm sure I'm not the only one. So here's my idea.
If we could get enough entrepreneurs together, say the people from this site for a start, to form a kind of credit union we wouldn't need the banks. With, say, 50,000 members, each paying a monthly due, say $20, there would be $1,000,000 every month to lend out. There would be almost no need for brick and mortar offices, or a bunch of high paid executives, it would be demacratic and online. If a member wants money they would post their proposal on the web site, for the other member to vote on. The member would put a limit on the amount of time the money is needed in, shortest being maybe a week, and in that time if there are enough yes votes the person gets the money. This could be set with extremely easy repayment terms.
I don't know, something I dreamt up at work today. Any ideas? Improvements? Critisims? think it would be possible? Lemme know what you think.

**davidansell** · 05-08-2011 05:30 PM

Pretty decent Idea, I thought of starting up something similiar 'however due to funding issues' I was unable to do so.

But with 50,000 members putting in $20/£20 per month it wouldnt be such a problem, what would be the returns to each member though?

You can email at info@putermedic.co.uk

Thanks.

**jmarshall** · 05-09-2011 07:46 PM

That's one of the biggest problem of starting it up, convincing enough people to get involved when the only returns the members get is the access to funds. The benefits of having easy access to funds would allow more people to pursue their dreams, or build their existing business. Sure their wouldn't be dividends, like a normal credit union, but I believe the cash the members would be able to get access to, allowing them to bring in more money at their business, would be better than dividends.
If enough people got into the conversation, and eventually the project, we could iron out any issues so everyone benefits.
It could even offer small grants to members, just a thought.

**Mohamed-H** · 05-10-2011 02:25 PM

Do you realise on how many people would need to vote on the issues once they have paid?

**davidansell** · 05-16-2011 04:20 PM

jmarshal, do you have an email address where I can contact you?

**jmarshall** · 05-16-2011 04:51 PM

Not sure what you mean. If you're saying how many would need to vote on each proposal, perhaps it would just be whoever gets on to vote during the period, not every proposal would be voted on by every member. For instance some people might never vote, like a democracy the members would have the choice to vote or not. With thousands of members, there would be thousands of proposals every month, so obviously not every one would be voted on by every member. Perhaps a minimum could be set, or only the highest vote getters for that month would get what they requested, until the money for that money is gone. There could be numerous possible solutions. Did you have any suggestions? Trying to flush the idea out, see if there would be a way to make it work.

**lccglobals** · 06-02-2011 07:04 AM

starting up a business have always been difficult to those who aren't aware of market trend and business type they should have one... my general advice is to take a advice of a person already running business or successful entrepreneur can also be a good to be advised from. Or people may also take market research regarding their business so they normally get an idea of capital required and a business consultant can also help and provide best matched business idea.

**zakkclyde** · 06-28-2011 03:01 AM

Originally Posted by jmarshall

Not sure what you mean. If you're saying how many would need to vote on each proposal, perhaps it would just be whoever gets on to vote during the period, not every proposal would be voted on by every member. For instance some people might never vote, like a democracy the members would have the choice to vote or not. With thousands of members, there would be thousands of proposals every month, so obviously not every one would be voted on by every member. Perhaps a minimum could be set, or only the highest vote getters for that month would get what they requested, until the money for that money is gone. There could be numerous possible solutions. Did you have any suggestions? Trying to flush the idea out, see if there would be a way to make it work.

Lovely idea mate now we need more people to participate on this project.

**BGC** · 07-01-2011 10:49 PM

You could do one vote per dollar contributed, with multiple votes per project accepted. That way, voters could pick and choose what they voted for, if someone input more money, they'd have more leverage, and they could just pay attention to the projects that looked appealing to them (or not vote at all). Then, when the project was funded, whatever the vote ratio was (how many votes per user), that's how the available equity could be split. So if person A voted 40 times, and person B voted 10, and that project got funded (and no one else voted) person A would get 80% of the available equity and person B would get 20%.

Neat concept. I'd do it!

**loan specialist** · 07-05-2011 08:20 AM

that's a pretty good start but i think the next best sensible question is who'll be in charge of the treasury and disbursement once a proposal has been approved? i think we should start with a core group. i dunno but always it's a question of trust. so guys pour in your ideas. this is a great venture and big help to those who have big business ideas.

**Southern_Lenders** · 07-05-2011 12:09 PM

Originally Posted by BGC

You could do one vote per dollar contributed, with multiple votes per project accepted. That way, voters could pick and choose what they voted for, if someone input more money, they'd have more leverage, and they could just pay attention to the projects that looked appealing to them (or not vote at all). Then, when the project was funded, whatever the vote ratio was (how many votes per user), that's how the available equity could be split. So if person A voted 40 times, and person B voted 10, and that project got funded (and no one else voted) person A would get 80% of the available equity and person B would get 20%.

Neat concept. I'd do it!

I like that idea.

So this is kinda like kickstarter.com except you pay to be a member and you have to pay back the funds.

I don't like the credit union example, because credit unions are non-profit in nature. If I'm lending 240 a year, I want to see some good roi.

Here is how I think it should work:

1. Have a solid disclaimer: Clearly state the costs, terms and the risks.

2. There should be $1.00 for every 1 vote. so for $20.00 a month (or whatever your contribution may be) , you get 20 available votes (or more) to be used in the funding process. and like BGC said, the person with more votes (more money) should have a higher ROI as well.

ALSO, my money should not be taken from me if I don't vote on a project. So for example if say 90% of people like an idea, they should be responsible for funding it, NOT the people who don't like the idea and didnt vote on it.

3. We all know that 80 to 90% of businesses fail within the first 3 to 5 yrs.. at least thats the mantra i keep hearing, so with that in mind, I'm not going to vote for an idea that I think has a low chance of success.

so if someone wants to start the 1 billionth t-shirt company, I'm not going to vote for it, I don;t think most people would either. So the bad ideas don't get funded while the better ideas rise to the top. I think for this idea, a voting system like reddit.com would be handy.

also whats the voting requirement before one gets funded 51%..70%..

This kinda seems like a VC idea with a twist... With 50,000 people, and only a million dollars to go around, only a handful of people are going to get anything..

People should be required to submit business plans, and/or video (like kickstarter) so the members can review each persons request.

as far as paying back the loans, thats when things get complex.. how will you determine an interest rate?..what if they don't pay..is there collateral?..if members dont pay, do they get kicked from the site?..

This business would probably have to be registered with the SEC, FINRA, and other agencies...

**Daniel Smith** · 07-06-2011 06:31 AM

Hello,

You can assume that any bank loan you will get is going to require you have 30-35% of the cash to buy the business up front.
There is a way around it though - I'm hope (perhaps wrongly) that you must know someone special - for example, is this your parent's business? Given that you know it will be for sale in the future you seem to have some inside information.
Assuming you do know an insider you may be able to structure a loan for owner financing. Basically the owner gives you a loan and you repay him/her. You'll still probably need to come up with a fair amount up front but it's much easier to get a loan for $50K from a bank than a loan for $200K.
Also, if the land value + other assets of the marina are worth more than $200,000 you may well be able to get a bank loan anyway. At that point it's basically a mortgage in terms of the bank's risk assessment.

Thanks a lot for your help!
Daniel Smith
__________________
Internet Marketing Company | Online Marketing in Carlsbad MaxAudience

**SIA** · 07-06-2011 08:47 AM

I've seen ideas like this before, there are a few inherent problems that you will need to overcome if you are to have better success than those I have seen across my table in the last 15 years.

1. Equality

Person A puts in $1,000.00 and person B puts in $10.00. Two choices are available here. Either both share an even vote, in which case why did person A put in $1,000.00, or votes are based on how much was put in which means that person B would have no say in the grand scheme of things. Knee jerk might be to let person B go to the wayside, however there will be more small amount investors than larger ones any day, so you need to keep in mind that for every Person A you will have 100 Person B's. My suggestion to this? Only allow $20.00 per month, per person to go into the overall till, so that seniority is based on longevity and not simply wallet size. or DD style it where someone would present their idea and proposal along with their SWOT and total amount of funding desired. Viewers could then come to their page, ask questions, challenge the presenter, and if viable, pledge a certain amount of money to them. However, in order for them to receive funding they would have to get 100% of the funding they were seeking.

#2 ROI Projections

All investors, no matter how big or small, are looking for the largest ROI they can get their hands on. All entrepreneurs are trying to give away as little of their business as possible. What many start ups seeking funding don't realize is that many investors also have to make up for previous losses or low returns when considering funding. So to that end, the presenter's page should also have repayment and ROI projections. This should include equitable liquidity. This means if the project fails, how much of it can be sold for tangible funding to minimize any loss, I.e. vehicles, property, etc..

#3 Operation costs

Where will this project see it's funding coming from? You have two choices,

A. charge the investors based on their monthly fee.
B. charge the presenters for the ability to present.

With A. you run into the problem that investors will have to take that number into account in their investment and may very well give up a smaller part of their money. With B. you're talking about people who need money in the first place so you either make the rate low per presentation or base it on successful funding. If you charge them up front, your number will need to be low enough to encourage ideas and presentations. If you base it on funding, you risk literally thousands of half thought ideas being on your website that will lower the overall value of the service you are providing. I personally would suggest something along the lines of $25 per idea, but only when you had enough investors on board that a presenter sees a value in what they are doing.

#4 Legal

What if someone presents a wild herring and gets funded only to run off with the money? What are the liabilities of your company in seeking to get the funding back to those investors? If you say none, then where is the additional value to the investors? If you say total, then you are talking about a ton more work on your side in background checks, internal risks on any presenters, and additional costs. My suggestion would be to create a validation system that does a check on presenters. This would include DOJ, residency, risk assessment, and equity. You would have to charge presenters for this, which again, is dipping into money they may not have.

Don't get me wrong, I like the idea, and would be interested on both sides of it myself, but just wanted to layout some of the threats you would have to consider in a project such as this.

**Southern_Lenders** · 07-06-2011 11:16 AM

Not to mention, with 50k members as the op suggests, how would you manage an investor base that large?. That's fortune 500 territory for sure.

And who would pay for initial start up costs?.. business name, legal structure, license..web site etc.. This would probably be something like lendingclub.com in functionality . I'd see it costing 100,000 easy.