FREEDOM BOOKS - The Midas Method

Working Capital

This is the amount of money you will need to fund your business until it gets off the ground. In the window cleaning example, let us suppose that you only start to make money when you are cleaning at least five hundred windows a week. This means that for the first few months, you are going to be running at a loss. How are you going to fund that loss? The answer is with the money which you will be putting into the business to start with.

You will also need to buy quite a few items of 'capital' expenditure. For example a bike, ladders, buckets, typewriter, letterheads, leaflets, company registration fee, telephone answering machine and so on. This little lot can easily add up to a few thousand pounds; this is money going out the door before you get a penny back. Where are you going to get this money?

You can either fund it yourself, (from savings or by selling something), or you can borrow it.

If you are funding it yourself, your bank manager is likely to be very sympathetic to your cause because there is no risk to the bank - you are not asking for a loan or overdraft.

If, however, you are 'penniless' (remember my definition in chapter 6), then you will have to try and borrow the money from the bank.

In this case, your manager will go through your proposals with a fine tooth comb; even for a modest few thousand. In fact it has been my experience that the larger the amount you wish to borrow, the easier it is! The bank manager will also probably suggest that you match "pound for pound" any loan which is provided. For example, if you want £5000, it will be suggested that you put in £2500 and the bank puts in the other £2500. This has the effect of seeing how serious you are about your chances of success. If you aren't willing to back your brain-child with hard cash, then why should the bank be expected to have more faith in your idea than you do? At least, this is the bank's attitude. The fact that you haven't got a bean will cut little

ice with them.

Also, don't expect to get any more than fiddling small change unless the loan is secured against a tangible asset (like your house). If you don't 'own' a house, then you are viewed as a miserably dis-advantaged lower life-form, and are most unlikely to be offered any loan worth having. If you are in this situation, then you will just have to find the money yourself somehow. I did.