Week 74: Other Forms of Finance

Better known as ‘other people's money’ in the industry.

Welcome back amigos! Hope everyone enjoyed the super sunny weekend this Bank Holiday Monday. As a result I have fallen behind with my blog (sorry it's late) and had a list of pals on my visiting list, two years overdue by the way. It has interfered with my work but it's not always about money. This week's blog is on raising finance as I'm frantically exploring my options here to see what is available. If it's cash you're after you may want to read the content as it could give you an idea of where to go or what to look for.

Bank-Loan/Overdraft

Let's start off with the more familiar ways of financing. Loans! We’ve all taken these out at some point whether it was to purchase a new car or that small wedding. Some words of advice when it comes to personal matters: bank loans can be ideal but they are rubbish when it comes to providing funds for investments. As they class this as higher risk and subject to vigorous testing. I will never understand their rationale as they will give you money to get into debt (holiday/car finance) but not something that will bring in an income thereby creating wealth. 

Tip: You can still give them a go. If it's a small project you can do a light refurb on a personal loan. Not illegal but not desirable either if you know what I mean.

Private Investors

These are high-net worth individuals who are willing to contribute some pounds into your investment proposal. They can be people you know or complete strangers who you meet through your property journey from attending networking events, property related face-book groups and LinkedIn. The list is extensive as potentially anyone can be an investor. It will have to be a professional set-up with contracts drawn, interactions agreed and rates & dates confirmed. This is my preferred method and is work in progress.

Tip: Speak to everyone and anyone. Never assume and keep an open mind as you never quite know who’s the secret millionaire haha

Angel Investors

I have no experience of these at the moment but have had a mixed bag of reviews. They are similar to the above, described as sophisticated investors. They can be individuals, a collective group or an organisation. Usually they will lend against a share of the company or profits so these will have to be researched and agreed in retrospect. I would probably advise this for more lucrative, complex and bigger deals as working on a small condo will not be worth their time.

Tip: Go watch some Dragon’s Den on catch-up television and get inspired 

Crowdfunding/Peer to Peer Lending

Don't be put off by the names. These are professional platforms designed and monitored by financial experts in the field to help raise capital. It's an alternative means which is quickly gaining popularity amongst the property world, but can be very expensive, but because they understand the industry they are not hesitant to provide the funds. If speed is something you're after then this could be your ticket. They will scrutinize your project from the get go and only finance the deal if they believe in your project, so it’s peace of mind and a great indication early on that your project is viable. That’s peer to peer explained, in crowd-funding individuals or organisations can choose which projects they would like to invest in for a return or reward. If it's donation based you will not need to return the contribution but it is hard to raise in the first place with competition being so fierce.

Tip: I know they say don’t follow the crowd but in this case rest assured you can follow the crowd

As you can appreciate this topic is huge and contrary to popular belief there is plenty of finance out there (let’s break it down for next week unless you want a brain fog) haha.