Has anybody ever approached thier bank, or any bank, and discussed borrowing to set up a trading business? Do you know of anyone who has been approved a business loan for trading? I'd be interested in knowing what criteria the banks would find acceptable in terms of proofs from the borrower etc. Any experiences?
B
Black Swan
IMHO you've missed your window for this. Very straightforward getting a bank/business loan to buy/sell equities or securities from (for example) 2004-2008, no chance now, unless you offer security for the loan....
donaldduke
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Unlikely but some bank somewhere may, if so the interest rate is going to be extortionate unless you provide security.
Much easier to just ask 'friends and family' for investment capital and split profits 50/50.
If you have good business plan and a good reputation people will throw money at you.
Ofcourse its very important not to abuse this.. but some will give into temptation.
Would it be wise to have friends and family tied into a legit business? The last thing i would want is 'auntie Doris' calling me twice a week to ask how her 'investment' was shaping up.
Claudia123
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Paul
First, is it wise to borrow to trade ? Trading can be tough enough without worrying about capital and interest repayments.
Second, if you are serious then go and see your bank they are the only one's with the answer. They will want proof of track record in trading, detailed business plan, cv etc etc etc. If by some miracle they agree they will want security for anything over 10k or so.
Friends and family is not good idea.
UK banks only lend right now to people who don't need money.
First, is it wise to borrow to trade ? Trading can be tough enough without worrying about capital and interest repayments.
Second, if you are serious then go and see your bank they are the only one's with the answer. They will want proof of track record in trading, detailed business plan, cv etc etc etc. If by some miracle they agree they will want security for anything over 10k or so.
Friends and family is not good idea.
UK banks only lend right now to people who don't need money.
B
Black Swan
Yo Pauly, a suggestion and a possible plan/rough outline to follow; know a guy who recently put together a business plan illustrating a 50K total start up cost. Nails costs down to 22K. Gets grant for 10K. This low overhead/low employee 'tech-ish' company can be profitable in 3 months - already has firm commitment from cash rich clients for 12 month support. 'Sells' investment opportunity to businessman (who will bring something to the party) for 12K for 30% of the business...He can visualise sale exit of circa £1mil...
IMHE (experience) the best businesses (us mere mortals set up) always start with little or no capital. By using his smarts this guy now has 70% of a business with no financial outlay...
IMHE (experience) the best businesses (us mere mortals set up) always start with little or no capital. By using his smarts this guy now has 70% of a business with no financial outlay...
Claudia,
Trading as a business for oneself does seem to have a certain stigma atttached to it. Surely the banks know all about trading 'other peoples money', i'm not sure they would want to be on the other end of the stick.
Black Swan,
there are so many scammers and conmen involved with the markets. I just can't see how any serious businessman would invest his capital and trust into a total stranger with nothing but so called account statements that could easily be forged. To me this is absurd.
donaldduke
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You need to be selective in the people you choose, if your business idea is good there will more investors than you need.
Pick people you know are very comfortable with taking on risk and who are only investing a small % of their net worth. Also be prepared to ditch them quickly by returning funds if they turn out to be a pain in the ass.
Also when you manage money for people you need to be conservative with the initial investment so they dont lose too much of what they put in. Once the fund is up 20% you can increase the risk.
Set reporting rules upfront. eg you will only give quarterly updates.
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Haha. You see, business and pleasure never mix. To lose the banks money through proper and honest business can be accepted, dealt with ammicably and even pardoned. You go and lose 'friends and family' money and it can get very nasty indeed, death threats, arson attacks and worse.
Of course, everyone involved needs to know where they stand from the outset of any venture. You also make a good point about selecting good business partners, keep the riff-raff at arms length so to speak.
'Pie in the sky' business ethics are just no good, and will only lead to failure. Not that it matters to some of the low-lifes out there who just want to steal easy money. I compare these types to smack head muggers, morally speaking that is.
Trader333
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Paul,
This is my view (and only that)
1) I would never borrow money to trade as it adds an additional stress if losses start to mount
2) I would not involve any family or friends as I have seen good friendships collapse over business ventures as well as families not speaking to each other.
3) I agree with others in that the banks will not lend money even to conventional business models without collateral and if you already have enough then you wouldn't need to bank to start with.
Paul
This is my view (and only that)
1) I would never borrow money to trade as it adds an additional stress if losses start to mount
2) I would not involve any family or friends as I have seen good friendships collapse over business ventures as well as families not speaking to each other.
3) I agree with others in that the banks will not lend money even to conventional business models without collateral and if you already have enough then you wouldn't need to bank to start with.
Paul
donaldduke
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donaldduke
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I have actually been down the Friends/Family route in the past.
I picked a couple of friends who understood the risks, knew a bit about trading and could take any hit.
They gave me about 10% of their liquid net worth and i aimed not to lose more than 10% of their initial investment.
So these guys werent really risking much.
Worked out very well in the end.
I picked a couple of friends who understood the risks, knew a bit about trading and could take any hit.
They gave me about 10% of their liquid net worth and i aimed not to lose more than 10% of their initial investment.
So these guys werent really risking much.
Worked out very well in the end.
JohnnyForex
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I would never lend from family or friends either.
The downside is way too big.
The downside is way too big.
donaldduke
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Only if you are a crap trader.
JohnnyForex
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Sure, but if you are not a crap trader, why would you have to borrow money in the first place? Did you blow up or what happened?
I would imagine that most traders in need of capital are new in the world of trading and want to leverage their skills with a bigger account.
However, if history is of any indicator, most new traders struggle for quite a while before they "get it". Actually, quite a lot of new traders never "get it".
If one can document a good track record with good risk-adjusted returns and metrics, it should not be a problem getting a loan with a bank or a job at a prop firm.
And if one should lose the money anyway, one does not risk important relationships with family and friends.
But hey, that`s just how I see it
Johnny
neil
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