I’ve been advised to go out and find deals and the finance will follow. I have found a few suitable projects, done the sums and offered to purchase. We lost a deal earlier in the year as we failed to finance it and we currently have two deals on the table that are good few weeks down the line and the vendors are starting to get itchy feet (quite understandably).
This has really started to stress me out. The reason for the immense stress was that I was putting my credibility on the line. I was making promises to do something that i had no way of fulfilling.
Now it’s certainly motivating, it makes you take action, but raising finance is not a quick process. It takes time to build relationships and trust - it’s not something you can fix with 'hustle'.
So, how do people deal with this? Do I need to change tack and concentrate on getting financial backers on board first and then start looking for deals?
This is the perennial dilemma of getting private money to fund your deals. Deal v cash ... typically when you have one you don’t have the other.
Usually when you find a deal that needs doing quickly, you don’t have someone with private money that is ready to invest right now. Conversely, when you have built up the trust over multiple coffees, you don’t have a deal ready for them to invest in. When you do find a deal and go back to them to ask for their money now that you have a deal, often they have invested it elsewhere because they didn’t want to wait and something else came along.
Unless you are borrowing the money on a fixed interest basis, you have the additional burden of abiding by the FCA directive PS13/3 requiring you to get proof that you are dealing with a Sophisticated Investor before you are permitted to reveal the specific details of your equity investment deal. This is a prerequisite for any investor offering a share of the profits (or losses) in return for a cash investment in their deal.
There is a far simpler way to get Other People’s Money in your deal and massively reduce your stress levels – use bridging finance
If one bridger happens not to like your deal, there are always other readily available bridgers who will like it.