The Ultimate Guide
To Financial Prosperity
By Jon Murray
IMPORTANT NOTICE :
This guide is intended for information only.
At the time of writing it was believed that all
information contained within this guide was
accurate, as far as could be established.
Because of frequent changes in banking and
property dealing rules and legislation the
publisher offers no guarantee that any
information contained herein will remain to
be accurate at any particular time.
The publisher accepts no liability
whatsoever for any consequences of any
transactions entered into by readers of the
material within these pages.
Contents
Page
Introduction 6
1. The Secrets of Obtaining a First Class Credit Rating 8
2. How to Have CCJ'S Legally Removed 11
3. Raising Thousands in a Matter of Days 13
4. A Guaranteed Income of £100,000 In a Year 15
5. All the Credit Cards You Could Ever Want 17
6. Virtually Unlimited Finance from Your Credit Cards 18
7. Finance for Your Business - 100%! 20
8. Control of Companies - Without Capital 21
9. "Borrow" Money - That You Don't Need to Repay 25
10. Become A Paper Millionaire - Almost Instantly 27
11. Access Millions in Venture Capital 29
12. A Loan Which is Guaranteed by the Government 32
13. Huge Profits from Property Deals -
Using Other Peoples' Money 33
INTRODUCTION
For over 20 years now I have bought just about every money-making guide I
have seen advertised. I have spent literally a fortune accumulating the wealth of
information which is available to you in these pages.
Many of the guides and manuals I have purchased have been very informative and
valuable. However, most of them have been either useless or of very little value at
all. Throughout my years of painstaking research and business enterprise I have
accumulated a great deal of financial and business knowledge.
For this guide I have attempted to include only what is entirely pertinent and useful
and have omitted any superfluous facts or pointless information.
This guide is designed with two goals in mind. One, I naturally wish to sell the
guide to make a lot of money for myself. And, two, in order to ensure that you
have excellent value for your money, I will show you how to go about increasing
your fortunes in ways which you may never even have considered before.
If you study all the principals and techniques included herein and then apply them
to your own life, you will certainly accumulate wealth the likes of which you
possibly only dared to dream about before.
One thing of which you must be certain before you commence your fascinating
journey into the world of financial prosperity is your ability to succeed. You must
remove all negative thoughts about your abilities and concentrate on winning.
Set yourself the goals you wish to accomplish, and with the help of the invaluable
information within these pages, work out a plan for your success.
NEVER GIVE UP - PERSEVERE - AND, WITH THE KNOWLEDGE YOU
HAVE HERE AT YOUR DISPOSAL - YOU WILL SUCCEED.
In the words of Samuel Johnson :
Few things are impossible to diligence and skill.
Great works are performed not by strength, but by perseverance.
The above words were written by Johnson over 200 years ago...the basic
principles for success are constant!
More recently Calvin Coolidge wrote :
Nothing in this world can take the place of persistence.
Talent will not;
Nothing is more common than unsuccessful people with talent.
Genius will not;
Unrewarded genius is almost a proverb.
Education will not;
The world is full of educated derelicts.
Persistence and Determination alone are omnipotent.
The slogan "Press On" has solved, and always will solve,
the problems of the human race.
CHAPTER ONE :
THE SECRETS OF OBTAINING A FIRST CLASS CREDIT RATING.
Today it is virtually impossible to survive and prosper financially without a good
credit rating. There have been times in the past when I have taken business risks
that turned out very badly and I have lost a lot of money. Even worse than losing
the money itself is the damage that serious business failure can do to your credit
rating.
After having had over 20 major credit cards, bank loans and overdraft facilities,
with an ability to raise in excess of £100,000 in credit, I was left with massive
debts and a credit rating so poor that I couldn't even open an ordinary bank
account!
The one sure thing I learned about borrowing vast quantities of money, at high
interest rates, to finance business deals and ventures, is that access to credit is
virtually essential for any real wealth creation.
It was unfortunate for me that I had to learn the hard way about the importance of
maintaining an excellent credit rating. After having access to easy credit, I lost
hundreds of thousands of pounds on property deals and other business ventures.
Only after this experience did I realise how fortunate I had been to have been in
the position to gain the kind of credit I was using in the first place.
I have now re-established my credit rating to a first-class level, and I intend never
to create a situation again where my credit rating is put in jeopardy.
The method detailed below is the one I used to rebuild my credit rating back to a
level where I will never need to worry about access to money for any purpose.
When you have no money at all and your assets are all frozen because of debt,
and no bank or other lending institution will lend you a penny, you may think that
creating a credit rating where you can eventually borrow almost unlimited sums
would be virtually impossible.
In fact, with absolutely no cash at all, it is virtually impossible. Some amount of
cash is essential. To get this plan up and operational within the couple of months
that it takes to become productive an ideal sum of money would be in the region
of £1,000.
After enjoying a fairly wealthy lifestyle and being used to the finer things in life, I
ended up broke and almost bankrupt. I avoided bankruptcy by the skin of my
teeth.
To get some money to start my credit building plan I took every one of my
personal possessions which I thought I could sell. I attended car boot sales, at
which I managed to raise just over £350. I put together another £300 by selling
furniture and other personal effects through adverts in the local paper.
Keeping £150 as an emergency fund I took £500 to the nearest bank and
opened the highest interest savings account that I could get. After a week I
applied for a personal loan from the same bank and offered my £500 deposit as
security. Because the sum I wished to borrow was already held by the bank, they
were only too glad to loan me the £500.
So I then had £500 cash in hand and £500 in the bank. Naturally I had to make
monthly repayments to the loan. These were kept to a minimum by taking the loan
out for the maximum period allowed, which was 2 years. This left me with
repayments of less than £1 a day.
I then took the £500 I had borrowed to another bank and opened another high
interest savings account with it. Following the same procedure I opened savings
accounts at six banks and used the final £500 to cover the repayments.
After a couple of months repayments had been made to each loan I took the
£150 emergency fund I had set aside and added it to the capital I still had. I used
this to repay the last loan I had taken out. This allowed me access to the savings I
had with that bank. Then, after each subsequent month I paid off each of the
loans in turn.
Having done this it was easy to go to the first bank and apply for a loan of £500
secured on my home. They were happy to lend me this money because I had
shown them that I could borrow and repay a previous loan. So, in spite of my
terrible credit history, after having lost a great deal of money in business ventures
which went wrong, I had rebuilt my credit rating to a first-class level within six
months.
If you have no previous bad debts there is no reason why you could not establish
this level of credit rating within two months.
And once you have established a credit rating with a few banks you can apply for
their credit cards. Initially you may have to settle for a fairly low account limit, but
this can be increased rapidly by using the credit cards to borrow money up to the
limit of each card every month, and then repaying the full sum at the end of the
month.
Within a few months you can request and normally will be granted an increase in
credit limit. I used this method with store-cards also and now have a £5,000 limit
on most credit and store cards I use.
One thing to always keep in mind : once you have established an excellent credit
rating, don't lose it. I became too careless with borrowed money in the early days
because I had easy access to credit. Now that I have rebuilt my credit rating to a
top notch level I will never let it be ruined again.
Always be very careful when borrowing money to invest in wealth generating
programmes. Do your research...don't just jump in at the deep end...I did, and
lost out, big time!
Keep your credit rating healthy by always ensuring that you are able to make any
repayments that are due, and make these repayments on time. Even if you have to
borrow from one source to make a payment to another, this can be worth your
while as the maintenance of your credit rating is one of the most important things
you will need to take care of on your journey to financial prosperity.
CHAPTER TWO :
HOW TO HAVE CCJ's LEGALLY REMOVED
People who have CCJ'S (County Court Judgements) for bad debts will always
find it very difficult to borrow money from established lenders such as banks and
building societies. As outlined in chapter one, it is possible to get around this by
using the method of leaving money on deposit as security for any loan.
However, it is always in your best interest if you have CCJ'S on your credit
record, to have them removed as soon as possible. Records of CCJ'S are kept
by four main credit reference agencies for a period of six years from the date of
their inception. After this time they should be removed automatically, and if they
have not been, then you can simply write to the credit reference agencies and
order that they be removed.
In order to find out what information the credit reference agencies have on you,
you should write to them to enquire. Include your full name and address, any
previous address(es) you have lived at in the past six years, and £1 to cover
administration fee.
The four main credit reference agencies used by lenders to check on your credit
history are :
CDMS, Dove Mill, Dean Church Lane, Bolton, Lancashire, BL3 4ET.
CNN, PO Box 40, Nottingham, NG7 2SS.
Equifax, Spectrum House, 1a North Avenue, Clydebank,
Glasgow, G81 2DR.
Infolink, Regency House, 38 Whitworth Street, Manchester, M60 1QH.
Once you have obtained the information you need from these agencies, you can
decide what action you wish to take.
NB : In order for any record of CCJ'S to be legally removed, you must be able to
prove that at least one of the conditions below applies :
1) The six year period has expired, and the record should be removed as being
out of date.
2) The record should not have been lodged in the first place, as the CCJ does not
exist, and the record is a mistake.
3) The debt to which the CCJ applies has been fully paid off. Here you can insist
that the CCJ be removed because you have cleared all of your financial
indebtedness.
To apply to have judgements overturned, you should obtain form N244 from
your County Court (or Sheriff Court in Scotland).
During the period in which your application is being considered all records of
judgements against you are removed from the records of credit reference
agencies. Then several more weeks usually pass before the agencies can re-
instate these details, so even if your application is unsuccessful you have a period
of around 8 weeks where you have no CCJ'S on record.
In order that any judgements against you be set aside you must have a valid
reason, such as not receiving the original summons, being unwell or out of the
country at the time the summons was issued, or having discharged the debt within
a period of 28 days from the original issue of the summons, in which case no
record should have been registered.
CHAPTER THREE :
RAISING THOUSANDS IN A MATTER OF DAYS.
Once you have established a credit rating as described in chapter one you are in a
position to borrow thousands from the banks with which you have been dealing.
Go to each of the half dozen or so banks from which you deposited and
borrowed £500 (or whatever sum you were able to use) and request a personal
loan application.
Fill out the loan application for a sum of between £500 and, say, £2,000. Even if
you apply to borrow only £500 from each of six banks, that still amounts to a
total of £3,000.
Take the applications home, fill them out and take them, in person, to each of the
banks all on the same day. By doing this, any check on your borrowing will only
show up for any loans which you already have. The banks will not have details of
the loan applications made to other banks on the same day.
Because the individual sums for which you are applying are relatively small, and
because you have already established yourself as credit-worthy with each of the
banks to which you are applying, you should find that the loans are approved
within a matter of days. Sometimes you will get clearance on the same day you
apply and can leave the bank with a cheque for the loan amount.
Often banks will deposit the money directly into your account with them. If this is
the case you simply go to the cash desk and make a withdrawal for the full
amount either later the same day or whenever it suits your convenience.
Using this method I borrowed £8,000 and deposited the full amount with another
bank from which I had not originally borrowed. I deposited £5,000 in a savings
account with that bank, and £3,000 in a current account.
By lodging the £5,000 as security I then was able to borrow a further £5,000 and
repeat the process as detailed in chapter one. Ultimately borrowing £30,000 I
then invested in a small run-down, one bedroom flat for £18,000. I paid £7,000
to have this flat completely renovated and sold it 6 months later for £32,000.
Even after interest payments I still made a profit of over £5,000.
£5,000 in the space of 6 months is not a great deal of money, by any standard.
However, when you consider that I had been virtually bankrupt less than a year
earlier and started the whole venture with only £650 in total I think you will agree
that it is not a bad return.
I mention the property deal here because that is what I did with the money I
borrowed at that time. I have been involved in many property deals over the
years, most of which have made considerably more than £5,000...often more than
ten times that amount. This example is pertinent here because it shows what can
be done with the smallest amount of starting capital.
Once you have used the method of borrowing detailed above, you will eventually
develop a credit rating where you will be able to borrow between £10,000 and
£20,000 within a day or two of applying.
If you keep building up the amount borrowed, and expand the number of banks
you deal with to ten, then you only need to borrow £10,000 from each one in
order to raise £100,000.
First of all you can borrow as little as the £500 originally discussed in chapter
one. But expand the number of banks you use to ten. You then go to as many as
all ten of these banks and request a 30-day loan of £1,000. Because of the credit
rating you have established you should have no trouble at all in borrowing such
small amounts from each bank.
When the 30-day borrowing period is over, repay the whole amount to each
bank on the same day. After another month or two, go to all of these banks again
and ask to borrow £2,000 for a sixty or ninety day period.
Again, repay the loans promptly at the end of the sixty or ninety-day period. After
another two or three steps using this method, you will be able to borrow at least
£10,000. Because you will now be recognised by the banks as someone who is a
very good lending risk, you should be able to have a loan of £10,000 approved,
at each bank, within a day or two.
So, once you have built your reputation for credit-worthiness, you can raise at
least £100,000 within two days of applying.
CHAPTER FOUR :
A GUARANTEED INCOME OF £100,000 IN A YEAR.
It is something of a truism that success breeds success. Likewise with money.
Money can be used to "breed" money. Provided you have access to the
necessary capital in the first instance, and are careful about selecting the kind of
opportunities which offer a high return for a minimal risk, you can earn a very
worthwhile income...using other peoples' money!
One excellent method of amassing a large amount of capital and guaranteeing
yourself a very high annual income is to form your own corporation.
The cash you generate from the sale of shares is much cheaper than
borrowing...there is no interest to pay, it does not incur monthly repayments will
pay your salary and is not subject to taxation.
Regardless of what the company does by way of trading, it is possible to issue
shares at a nominal value of, for example, £1.00 each.
You can buy a limited company off the shelf and convert it to a public limited
company. You then write into the company charter an authorisation for the issue
of one million shares with no par value.
These shares are then divided into lots for distribution. You could keep 300,000
shares for yourself, allocate a further 400,000 for sale to the public at £1.00 each.
Then set aside the remaining 300,000 for sale at a later date, when the value of
the shares has risen, so that the sale price is much greater than the original £1.00
each.
Contact a stockbroker and offer to let them sell your shares at an agreed
commission (normally around 20%). Impress upon the broker that yours is a new
company which is set for rapid growth.
With the capital raised from the initial sale of shares invest in getting the company
up and running. Once you are trading profitably your shares will start to
appreciate in value. It is not uncommon for shares in a newly established company
to show a three or four-fold growth within the first few months of trading.
The initial capital from the sale of 300,000 shares, less 20% brokers fee, will
leave you with an operating capital of almost a quarter of a million pounds. With
this kind of money it is a fairly straightforward process to employ sales and
management professionals to run your company and financial experts to advise on
the best commercial strategy.
With a three-fold increase in share value your 400,000 shares now have a
nominal value of £1,200,000. The remaining 300,000 worth of shares can then be
sold at £3.00 each or close to that amount. Supposing you can sell them for only
£2.00 each, you still are able to raise a further £600,000 in operating capital.
Keeping your 400,000 shares as a nest-egg for your future, you award yourself a
salary of £100,000 per annum as the company chairman. You don't even need to
take on a managing director's responsibilities, and would be well advised to
employ an experienced business professional to fill this post.
The most difficult phase of establishing your own corporation will be in converting
your limited company to plc status. The formation or the buying off the shelf of a
ready formed limited company is a straightforward process. However, in order to
elevate your limited company to public status will require expert professional
guidance.
It is quite possible though, that you could find a suitable business professional to
perform the necessary work for an agreed shareholding in your new company.
CHAPTER FIVE :
ALL THE CREDIT CARDS YOU COULD EVER WANT.
As discussed in chapters one and two it is possible to build up an excellent credit
rating which will allow you to borrow large sums of money from banks.
Providing that you always make agreed payments in full and on time you can then
move on to building up a large collection of credit cards. Start with a Visa and
Mastercard from all the banks that you have borrowed from. Then apply for
cards from any other banks which provide credit cards.
Quite often you will find banks advertising credit cards at a preferential interest
rate. The advertising usually concentrates on the concept of using that particular
bank's card to consolidate all your borrowings from other sources which have a
higher rate of interest.
When you apply for a card advertised as being a handy way of paying off all your
other cards and overdrafts the issuing bank will assume that you are going to use
their card as an alternative to the cards you already have. Because of this they will
be keen to issue their card with the minimum of fuss. However, once you have
obtained their card you are under no obligation to cancel the cards you already
have.
As mentioned in chapter two, apply for and obtain as many cards as you can get.
Providing you have kept to your repayment agreements on all loans and cards
there is no reason that you should be refused any new cards for which you apply.
I now only use three major credit cards and two store cards. This is because I
have managed to accumulate working capital and tend to use current account
overdrafts when needed. However, in the early days of needing fast cash for
business investments I used over 20 credit cards.
CHAPTER SIX :
VIRTUALLY UNLIMITED FINANCE FROM YOUR CREDIT CARDS.
When I used my credit cards to raise finance for rapid growth business deals I
was able to raise over £70,000 on cards alone. I could raise a further £30,000 or
so on overdrafts and 'personal reserve' accounts with agreed borrowing limits.
There are many opportunities to make a lot of money in a short time when you
have the capital to invest. Naturally, because of the high interest rates payable for
cash borrowing on credit cards, the only reason you should borrow large sums of
money using this method is to invest in opportunities which virtually guarantee a
good profit in a short time.
Before I made the mistake of investing in business opportunities which I had not
looked into in enough depth, and so consequently lost money on, I used credit
cards to borrow several thousands at a time to finance some very profitable deals.
Some of these included the cash purchase of luxury cars, often after I had already
located a buyer with ready money to buy from me immediately after I had taken
possession. The best of these deals was when I bough a Mercedes 190E for
£8,750 from a private owner in London and sold it for £11,000 to an eager buyer
in Edinburgh who had already told me that was the price he would pay for this
particular car. The purchase price was raised solely through my Visa and
Mastercards.
I actually borrowed £9,000 and took a luxury overnight stay at the Hampshire
hotel in Leicester Square as a perk of the "job". The best part, though, was
driving the car from London to Edinburgh.
I knew that I was making a sound investment, because, even if the man who had
agreed to buy the car from me had changed his mind, I had a car with a book
price of around £12,000 for less than three quarters of that sum. The very worst I
was likely to end up with was my money back!
Although I have made more money in property dealing than any other business
venture, followed closely by selling information, I still buy and sell the occasional
luxury car. Not because I need to, sometimes I only make a few hundred pounds.
I do it, just occasionally, because I enjoy it...it certainly beats working for a living!
Please note, because of the high interest rates of credit cards it is often not a good
idea to use the money borrowed on them to finance property deals. The trouble
with property, although it is nearly always a good investment, is that it can take
some time to turn it around.
Credit card borrowing should only be used when you are virtually certain that a
property is going to be ready for sale in a very short time and that you are
confident that it will sell quickly.
I bought a shop, over three years ago, which I still have not managed to sell. It
has been on the market now for over two years and looks like it will be some
time before I finally dispose of it. The initial sum of £25,000 for purchase and
repairs was raised on credit cards. But, after paying out thousands in interest I
finally paid off the credit cards with a long term bank loan. I was able to use the
property itself as collateral, so getting the loan was not a problem. I mention it
here simply to warn of the dangers.
When I first decided to buy the shop I was confident that I could have it ready for
sale within three or four months. This I did. I then used it as a storage space for a
further 9 months and then put it on the market. I know it will sell eventually, and I
expect to get the asking price of £57,000, but my initial hope of a fast profit soon
disappeared.
So, although there is great potential in using your credit cards as a means of
raising cash quickly to finance lucrative deals in property or any other business
transaction, please be warned: Tread carefully.
Providing that you take care to research the opportunity in which you intend to
invest, and make certain that you have every last iota of information available,
there is no reason for you to not make excellent profits. And once you have done
a few deals in whatever area of business you choose, you should recoup the
profits to build yourself a capital base. Working like this you will soon be able to
finance your dealings with your own money.
CHAPTER SEVEN :
FINANCE YOUR BUSINESS - 100%!
Using personal loans and credit cards to raise money for money-making deals is
one way of financing your business 100%.
However, if you apply for a business loan, your bank will normally only be
prepared to lend you an amount equal to that which you can put up front yourself.
So, as always, money breeds money. If you have £10,000 to finance your new
business, but feel that you would get off to a much better start if you had access
to £20,000, borrowing the other £10,000 would not normally be too much of a
problem. Any bank manager will normally be willing to lend you this kind of
money if you have half of the total amount required in the first place. This is
providing that you can supply the bank manager with a thoroughly researched and
properly documented business plan and cash flow forecast for the first 1 - 2 years
of trading.
However, most budding entrepreneurs will have little or no capital. This can be
very frustrating when you know you have a good money earning idea and have
worked out how to set up and profitably run the business.
So, unless you have enough money of your own to finance half the business start
up costs, it is best to avoid a business loan. Instead apply for a personal loan. Tell
the bank it is for a home improvement or the purchase of a new car, or for major
property repairs. Provided that you can satisfy the bank that you are a good
credit risk, they are not particularly concerned as to exactly what you will do with
the money.
Because you can borrow smaller sums from different banks, you do not even
have to be particularly concerned if you are unable to secure the full sum from one
source. Remember though, that if you are applying to a variety of sources, try and
get the applications in on the same day. This way, when the lenders do a check
on your existing borrowing, there won't be any information which they can obtain
to show that you are borrowing anything other than the amount you are applying
to them for.
CHAPTER EIGHT :
CONTROL OF COMPANIES - WITHOUT CAPITAL.
There are countless opportunities every day for individuals and firms to take over
companies which are in serious financial difficulties.
The type of business is not important. If a company is in serious trouble
financially, particularly if it is on the verge of bankruptcy, it is quite common for an
outsider to take over the operation and return it to profitability.
To find such businesses you would look in the local and national newspapers'
businesses for sale section, contact local business brokers and property agents
who specialise in the sale of businesses.
When you locate a company which fits the criteria of being in a very bad financial
condition, find out everything you can about it. Get all the information you can on
how much it owes, what it's assets are worth, who is running the operation.
Particularly look for reasons as to why it may be struggling the way it is...is there
something about the marketing operation which could be improved, could the
product(s) be produced a lot cheaper than hitherto, and when was the company
last trading profitably?
When you have collected all the information you can about the assets, liabilities
and potential of the business, work out how much it is worth, on paper. This sum
should be the amount you could realistically hope to obtain if you were to put the
business up for sale. It is the amount the assets of the company are worth after
deduction of all liabilities.
Once you have arrived at what you consider to be a realistic valuation prepare an
offer to buy the company for between 25% and 50% of this amount. However,
you will not be 'buying' the company for cash. You will offer promissory notes,
with an option to pay over a ten year period, in settlement.
If the owner or owners refuse to accept your offer you may need to revise your
position. If necessary, offer a five year pay off period for the promissory notes
and suggest a profit sharing plan which will reward the owners for allowing you to
take charge of the operation. Another option would be to offer all interested
parties part ownership of the business by way of issuing them with stock or
shares.
When negotiating your offer with the owner's insist that, due to the very poor
financial health of the business, you will need to withhold any payment on
promissory notes or dividends to shares, etc., for at least a year. This will give
you time to either make the company profitable again, or, as a last resort, sell it
off and make what you can from the assets.
You should seek the advice of a lawyer and have him/her draw up the terms of
the take-over agreement. Try to close the deal as quickly as possible, remember,
the company is on the road to liquidation, so you must project yourself in the
image of a saviour. Impress upon the owners that, without you, the company is
doomed to sure failure and bankruptcy. With your help the whole operation could
become profitable once again.
Don't be put off if you have no business experience. The majority of take-over
bids are by people who do not know how to run the business that they are taking
over. They simply show a professional image, offer to help the business by
arranging to reschedule it's debts and changing it's production and marketing
procedures to turn it around to profitability.
If your concern is to try and make the business profitable again, rather than to just
sell it off and make what you can, then you can enlist the assistance of business
consultants and marketing professionals to aid you in the return of the company to
profitability.
When negotiating a take-over you must be firm, even a bit ruthless. It is in the
owner's interest to see his or her firm taking on a new direction, and a return to
profitability which they have not been able to achieve themselves. They might not
be very happy about an outsider coming in to take over the running of things, but
when the alternative is sure to be liquidation, the choice they need to make should
work in your favour.
Don't be discouraged by the complaints from owners and shareholders that what
you are offering is too little. Impress upon them in the firmest possible manner
that, without you, the business is doomed to total failure, and though you cannot
guarantee to make it a success, you can certainly give it a much better chance of
survival than it currently has.
Once you have negotiated suitable terms for a take-over your first priority will be
to deal with the people to whom the company owes money. This can be much
more straightforward than you may have thought. Because the creditors will be
aware that the firm has been in difficulties financially, and because they are
expecting that the firm may file for bankruptcy and leave them with no payment at
all, they will welcome any new initiative which gives them a better chance of being
paid.
You should arrange to meet the creditors individually. Offer to pay between one
third and one half of the debts outstanding, with nothing to be paid for the first
year, and an overall instalment period of up to ten years.
At first you may think you will get a lot of resistance to your offers. Why should
creditors accept as little as one third of the money they are owed, and wait a year
before even being paid the first instalment, which could be as low as one tenth of
the total you are offering to repay? The answer is that, as an alternative to being
paid nothing at all, this is quite an attractive offer.
The creditors will be only too well aware that the business which you have just
taken over has been in financial difficulties. They would probably have resigned
themselves by this stage to the idea that the firm which owes them money was
heading for liquidation. They know that a firm which goes into liquidation will
often have nothing left, after it is wound up, to pay creditors. Most, if not all the
creditors will be expecting that none of the money they are owed would ever get
paid. So your offer should appear very attractive to them...a lot better than
nothing at all!
Draw up the terms of your offer in a letter and send a copy to each of the
creditors. Request that they sign the letter as confirmation of their acceptance of
this new agreement.
So, you now own the firm and already you have reduced it's total debts by at
least 50% and have removed all obligation to repay any debts for the next 12
months. This has all been done simply by negotiation, no capital was needed!
Your next move is to look at ways of returning the company to profitability. It is
very likely that the firm will own assets which are not essential to the day to day
running of the business and which could be sold to provide cash for improved
efficiency and expansion. Assets, not essential to the running of the business,
might include machinery and equipment, vehicles, stock, property, patents and
copyrights, licences and contracts. Sell whichever of these which are not
absolutely essential to the operation of the business. Get the best price you can, in
the shortest possible period of time.
Draw up a plan of action, with the help of marketing and management
professionals if necessary, which will make the company profitable. Set targets
and goals and do your utmost to see that they are adhered to.
If the sale of assets does not produce enough working capital to get things going,
look at other ways of raising the necessary cash. One good idea is to form a
partnership of professional business people who have available funds. You will
need to convince them that what you offer is a worthwhile investment, so your
business plan will have to show exactly how you intend to return the firm to
profitability.
To make the company more efficient you must concentrate on what it does best
and what it sells most of. Perhaps you could discontinue certain products which
have not been selling well. Push hard to promote the products which it is best at
producing and for which the demand seems highest. If any part of the operation
has been running at a loss, and does not look like it can be turned around, sell it
off. Be ruthless. Remember that, unless you strip costs to the bone, and maximise
income wherever possible, the business will almost certainly fail totally.
There are a great many books available which go into detail about how
companies have been saved from complete collapse. The famous trouble-shooter,
John Harvey Jones, has written several titles, such as 'Back from the Brink' and
'Managing to Survive', which are an invaluable source of information to the person
looking to take over failing companies and "turn them around".
CHAPTER NINE :
"BORROW" MONEY - THAT YOU DON'T NEED TO REPAY.
If you borrow money by obtaining a loan, it is referred to as 'debt' capital.
Another source of finance for business is 'equity' capital. Although this is, in the
strictest sense of the word, not really borrowing, but exchanging rights to receive
certain financial benefits in exchange for providing capital.
Obtaining money from a lender involves the necessity of repaying what has been
borrowed, along with an agreed amount of interest. So borrowing money in this
way involves the repayment of more than was borrowed. It costs you money to
borrow money. You must be sure that any money raised in this way can be used
to produce enough of an income which will be large enough to repay the principal,
the interest and give an overall, worthwhile profit in addition.
Equity money, on the other hand is money that you can raise which does not need
to be paid back. It is essentially funding for which you pledge part of your
companies assets in exchange for.
The best way to get equity capital is to go public. Form a public limited company
and sell shares to interested investors. Although you are technically 'selling'
something in return for this capital, you are not actually having to dispose of any
assets, so the money so obtained comes in without the need to give anything up in
return for it.
Of course you must retain control of the company by ensuring that you keep
ownership of at least 51% of the shares issued. As the main owner you have the
final say in how the company is to be run.
So, when you raise equity money, your company does not have to have made a
sale of any product. It can raise up to several millions of pounds operating capital
without having to dispose of either stock or assets. This capital can be used for a
multitude of purposes. You can use it to pay off debts, salaries, rent, taxes, buy
property and stock, pay for expenses and running costs and to launch a new
marketing campaign in your drive towards profitability.
Another method of borrowing money which you can keep indefinitely is to take
out loans to repay existing loans. When the new loan needs to be repaid, take out
a further loan to repay it. This may sound somewhat strange as you will have to
pay interest on the money borrowed. However, if you need finance in the long
term and can use the money to produce enough profit to repay the interest but do
not wish to repay the capital, this is an excellent method of doing so.
What to do is to apply for credit at twice the number of banks from which you
would actually accept loans. So, if you applied to a dozen banks for £5,000 from
each one, and accepted a loan from only half of them, you would raise £30,000.
If you have these loans for the short term, i.e. 60 days, you could then go to the
remaining six banks and accept the six £5,000 loans to pay off the original ones.
This process could be continued so that you are constantly paying back loans
with other loans.
This may seem like an unsound way of financing business deals, but when you
have access to opportunities which produce sufficient profit to pay for the interest
charges and give you a good income also, it can be very useful in that you are not
burdened by the need to repay the principal sum borrowed. Or at least to not
repay it from your own pocket.
Although this system can be employed to keep the borrowed money indefinitely,
the idea is that you should use it for investing in money-making deals which will tie
up the capital for the long term. After a prolonged period, and once you have
made sufficient profits, the business transactions in which you have taken part
should ultimately produce sufficient profits to repay the capital outright.
I have a friend who borrows money using this method and buys property to
furnish and let out to tenants. The rental income is always sufficient to repay
interest and leave him with a good income. After a few years the property is
usually resold to make a capital gain, leaving him with funds to repay the capital
borrowed with a tidy sum left over as pure profit for future investment.
CHAPTER TEN :
BECOME A PAPER MILLIONAIRE - ALMOST INSTANTLY.
As discussed in chapter four you can get much needed operating capital for your
business by forming a public limited company and issuing shares to raise money.
As well as issuing shares to third parties to raise capital you can issue yourself
with as many shares as you like. As in the example in chapter four, if you issued
yourself with 300,000 ordinary shares, which obtained a level of value of £4 per
share, you would be worth £1,200,000 on paper.
There are very many advantages in creating a company of limited liability. The
limited company is recognised as a separate trading entity to it's owners and the
liabilities created by the company need not be underwritten by the personal
wealth of the owners.
An ordinary limited company cannot sell shares to the general public, in order to
do so would involve 'going public', i.e. to become a public limited company.
Smaller and newer companies may not be able to obtain full stock market listing,
and so they have the option of becoming public without a full stock exchange
listing. To do this the company must join the Unlisted Securities Market.
Through the Unlisted Securities Market it is possible to go public whilst only
making as little as 10% of the capital available to shareholders. The normal five
years of records that are required to become fully listed are also not needed for
USM listing and the advertising requirements are much less.
When you are operating as a sole trader or as a partner you, and your business
partner(s) where applicable, are personally responsible for all the debts and other
liabilities of the business. This means that if your business was to fail, leaving large
debts, you could end up having personal property taken from you by order of the
court. In extreme cases you could even lose your home.
In a partnership the partners are jointly and severally liable, so each of you is
responsible for any debts created by any of the other partners. This could lead to
very bad financial implications should one of the partners incur debts of which you
were not aware. You may have heard stories about one partner in a firm
absconding with the assets and leaving the other partner or partners to suffer the
consequences. Trading as a limited liability company precludes all these dangers.
With a limited company you can trade in exactly the same way as you would as
an individual or partnership, but with the following highly attractive advantages :
In the event of liquidation you cannot be made to pay any of the debts of the
company from your own personal wealth.
The only liabilities for which you can be held legally responsible are for back
taxes.
Capital can be raised by the sale of stock. This method can save thousands of
pounds in bank and interest charges which would be incurred if you had to
borrow the money. As a sole trader or partnership this option for raising finance is
not open to you.
There are many tax advantages available to the limited company that are not
available to individuals. Taxes paid by the individual directly to the Department of
Social Security can be re-routed into more profitable areas, such as pension
funds.
In the event of bankruptcy you are permitted to write off up to a maximum of
£50,000 on a tax return. And because this does not affect your personal financial
records there is no damage done to your personal credit rating.
To form a limited company in the UK you can employ a company formation
agency. You will find addresses for these in publications such as Exchange &
Mart and the Yellow Pages. Listings of these agencies are also available from
Companies House, Crown Way, Maindy, Cardiff, CF4 3UZ, telephone: 01222
388588 (for England and Wales). In Scotland from Companies Registration
Office, 100-102 George Street, Edinburgh, EH2 3DJ, telephone: 0131 225
5774, and in Northern Ireland from the Companies Registry, IDB House, 64
Chichester Street, Belfast, BT1 4JX, telephone: 01232 234488.
CHAPTER ELEVEN :
ACCESS MILLIONS IN VENTURE CAPITAL.
For fledgling companies, or those in need of an injection of capital for expansion
or improvement in profitability, a very attractive way of raising money is through
Venture Capital. This method is particularly attractive to the company which has
gone public but has not been around long enough to gain full Stock Exchange
listing. Companies in this situation can still sell shares to the public, but by the
company being unlisted, marketing these shares is relatively difficult.
Investors are generally less willing to invest in companies without a stock market
listing because they know that, should they wish to dispose of their stock, finding
a suitable buyer will be much less easy than for a listed company.
Because the Government, particularly in recent years, is committed to
encouraging business enterprise there has been a rapid and welcome increase in
the number of institutions able to supply venture capital to new and expanding
businesses.
It is generally accepted in the business world that the initial and ongoing
profitability of new companies is greatly enhanced by early investment of working
capital. This realisation has led to a flourishing venture capital market.
There are many venture capital agencies operating in Britain today. Their job is to
attract investment from corporate and individual investors and allocate the money
to new and expanding businesses. These venture capital agencies charge a high
rate of commission for supplying venture capital, but only if the business which
they are financing is successful. If the business should fail, they attempt to recoup
whatever cash they can to return to the investors.
Often, if a firm which they have invested in fails completely they will simply write
off the investment. Investors know that this kind of venture capital funding is
relatively high risk. They are prepared to take this risk because of the potentially
much higher returns than can normally be achieved by simply buying shares in
already established business.
Raising venture capital is a particularly suitable method of financing a new or
expanding business which is not ready for stock market flotation. The investors
own a percentage of the company directly proportional to the amount of their
investment. It is not uncommon for a company to make a successful start with the
aid of venture capital and later, when established and operating as a public limited
company, for the managing owners to buy out the 'sleeping partners' who have
supplied a large part of the initial investment to get things up and running.
Most banks now have a venture capital subsidiary and a large number of
specialist venture capital funds are also available. To be eligible for large a
investment of this type of funding you need to have a sound business idea and a
realistic and properly presented business plan. It is not within the scope of this
guide to show you how to construct a business plan. There are many excellent
books on this subject and by looking through titles in the business and commercial
section of a good public library and good bookshops you will find all the
information you need concerning the creation of a professional business plan.
When you have a good business idea for a new venture or a realistic set of
proposals to make a failing company profitable you should construct a business
plan and cash flow forecast. Take this to venture capital lenders, either through
your bank or from private sources, and, providing your ideas are realistic and
your business plan is thorough and professionally presented, you can have access
to hundreds of thousands or even to millions of pounds in capital.
An alternative method of attracting venture capital is to advertise directly for
investors in your new or expanding business. Simply place classified advertising in
the appropriate section of quality newspapers and specialist financial publications.
Ads such as, for example, "Funding Required for Business Expansion" or "Capital
Required for Exciting and Highly Profitable New Business Venture", will attract
the interest of those who have money to invest.
When you receive a response to your advertising, arrange to meet with the
interested parties and give them a presentation of your business proposals.
Always act in a professional manner and appear confident and knowledgeable at
all times. Sell yourself and your idea in the correct fashion and the necessary
capital will be forthcoming.
You might be surprised how many previously inexperienced entrepreneurs have
started in this way. Simply by showing the right kind of 'get up and go' ideas to
the right kind of people, it is amazing how much money you could attract. There is
billions of pounds of money circulating around in our economy every day. If you
present yourself as a professional businessman or woman, there is no reason why
you should not get yourself a share of it.
The venture capital is, naturally though, only the beginning. Once you have
acquired the funding you need, you must ensure that the capital is put to work in
the most efficient manner possible. You must do everything in your power to
make a success of the business which you have gone to all the trouble of obtaining
funds for. A great many potentially successful businesses fail because they are
underfunded in their early stages, ensure that your new enterprise is properly
financed and your chances of success are immensely increased.
Managing to attract significant investment should not leave you feeling complacent
about the day to day running of the business though. Throwing money into any
business, good or bad, will always make things easier. However, just because
you have managed to persuade investors that yours is a worthy cause should not
distract you from your prime objective, that of making the company as profitable
as possible. The investors are not giving their money away. They are taking a
calculated risk in investing in your business because they hope to achieve a profit
in exchange for putting up their cash. So, you should never attempt to raise
venture capital for any enterprise that you are not confident can be made into a
success.
CHAPTER TWELVE :
A LOAN WHICH IS GUARANTEED BY THE GOVERNMENT.
Because our government is concerned to promote exporting of British goods to
overseas markets there is a great deal of government sponsored finance available
to the firm or individual who wishes to sell British goods to overseas customers.
The government runs an export credit programme which provides insurance
against political and commercial risks involved when selling to foreign buyers and
to maximise the attractiveness of terms offered to overseas customers.
Banks are part of the infrastructure which provides finance and expert advice for
exporters and export agencies. The government Export Credits Guarantee
Department (ECGD) provides insurance guarantees and a level of subsidy to
assist in maximising the level of goods exported from the UK. It is in the interest
of the government, and likewise in the overall interests of the people of Britain, to
ensure that the highest possible amount of British goods are sold abroad to attract
wealth to our country.
With the backing of the ECGD, finance can be obtained in many and various
ways. A supplier can insure up to 95% of his receivables with ECGD and assign
the proceeds of this insurance policy to a bank. This will enable him to obtain
finance from the bank on terms much more attractive than would otherwise be
available.
The ECGD will provide an unconditional guarantee for 100% of the principal and
interest of any loan acquired for the specific purpose of financing an export deal.
If for any reason the exporter is not paid by the buyer, he has recourse through
his ECGD insurance policy, to receive payment, providing he has not breached
the terms of his contract.
Full details of this loan guarantee and insurance system are available from the
overseas trade departments of any major clearing bank.
Further government guarantees on loans for business enterprise, and even outright
grants, are available in certain areas of the country. If you wish to start up a
business which will create jobs in an area of high unemployment there are very
attractive financial packages available.
Your local council and government economic development bodies will let you
know what is available, for what purposes, and in which areas. Local area
economic and business development projects can be contacted through
addresses in the telephone directory or by getting in touch with your local
Chamber of Commerce.
CHAPTER THIRTEEN :
HUGE PROFITS FROM PROPERTY DEALS -
USING OTHER PEOPLES' MONEY.
More fortunes have been made in property than any other area. This is the case
for most countries in the world, and certainly for all the economically highly
developed countries. The great majority of people fail to make fortunes in
property dealing because they imagine that it takes a great deal of expert
knowledge and experience and a lot of capital.
Naturally, having capital of your own for any business venture, whether it be
property, manufacturing or the provision of a service, would be a good thing. But
you may be surprised to know that the vast majority of people who have created
vast wealth for themselves through property buying and selling, have done so with
money which is not theirs.
Borrowing money is one way of getting the capital needed to finance property
deals. But an even more attractive method, and one which is particularly
appealing to those who are not in a position to borrow enough money to finance
the initial property purchase, is to buy the property for a third party, using their
money. And taking a commission on the sale.
The way you make your profit here is to ensure that you can source properties,
such as repossessions, which can be obtained at a significantly lower price than
their true valuation. You find one or more clients who are looking for a particular
type of property at in a specific price range. Finding these clients is not difficult.
The reason they will come to you and be prepared to allow you to buy on their
behalf is that you can inform them that you will obtain the property they are
looking for at a substantial discount on the true market price.
As an example; you find a repossessed property which you can buy for £40,000.
You can find out from the general price of properties of a similar type in the same
area what the true market value of this property is worth. Once you are fairly
certain that the property is worth considerably more than you are able to acquire
it for you can have this confirmed by a professional valuer. The valuation fee,
around £120 including a survey, is well worth paying as this gives you a true
professional's written valuation. The survey is also very important in case there is
some structural problem of which you were not aware. This will eliminate the
danger of becoming involved in offers for properties which have 'hidden'
problems, such as expensive structural repairs.
You find from your valuation that the property which can be obtained for
£40,000 has a true market value of £55,000. You negotiate a contract with the
mortgagee to sell you the property for £40,000. You find a buyer who is willing
to pay £52,000 for the property, a discount of £3,000 on the true market value.
You then offer your buyer a further incentive of paying his 5% deposit. This
makes your offer doubly attractive. Not only has the buyer already got access to
a property at a saving of £3,000 off the true open market value, but also has no
deposit to make (a cash saving of £2,600!).
Since the true saving to the buyer is an overall £7,600, he is very pleased with the
whole deal. And, even after paying legal fees your profit is still in excess of
£6,000. This method of making money on property transactions is very popular
and employed by a great many people who make substantial sums without the
need for capital.
Of course, the £2,600 deposit is actually paid to yourself. Because the buyer's
lending bank or building society will require this amount to be paid to them in
order to release the full £52,000 to you, you have to pay this amount, on behalf of
the buyer, directly to his the lender. In exceptional circumstances you may be able
to persuade the lender that the buyer has paid you directly, but this is not normally
allowed.
If you do not have £2,600 of your own you can borrow it using the methods
described in chapter one. Remember, at the end of the day this money is paid
from the £52,000 which the lender ultimately pays you. So borrowing from credit
cards or a short term, high interest loan is a perfectly good way of realising this
amount for the cash deposit.
This type of deal is called a 'back to back' transaction and the selling and buying
from the original mortgagee is performed on the same day. This means that you
do not actually own the property, the deeds are transferred from the original
owner to the new buyer and you, as the original owner's agent simply collect the
profit.
An alternative to this method is to raise the finance through personal loans and
credit cards and perhaps a second mortgage on your home and purchase the
property for cash. This method is particularly suitable if you wish to buy at
auction. Property auctions are a very good way to buy properties, usually
repossessions, at a price well below their true market value. The hazard of using
this method is that, by not finding a buyer in advance of arranging the purchase,
you may take some months to sell the property.
Of course you can use auctions to obtain property on behalf of a buyer who will
commit himself to purchasing from you once you have secured a property. The
auction method normally allows you to secure a property for a deposit of 10% of
the sale price. You need only find this 10%, instead of the whole amount. After
having paid your 10% you usually have between six and eight weeks to complete
the deal. This gives you ample time to arrange a 'sub-sale' transaction, where the
final buyer obtains a mortgage for 90% of the price which you sell to him for.
Since your selling price is likely to be between 20% and 30% greater than the
price you have secured the property at, the final buyer's mortgage is enough to
pay for the property and give you a handsome profit. The final buyer's incentive is
great in that he has purchased a property at 10% lower than the market price,
and has no deposit to make.
Tips to help increase your profits and ease sales :
When you obtain a property have it cleaned and do any minor repairs which
make the property more attractive.
It can often be worth your while to completely redecorate a property. The cost of
a few thousands pounds to do this can enhance the resale value and make the
property much more attractive to the buyer.
Make yourself known to local estate agents and have them inform you of any
repossessions which are about to go onto the market.
Always act in a professional manner when dealing with all parties concerned in
selling and buying. Project a smart, professional image and act like an
experienced property buyer, even before you get experience. If you feel there are
points you need to learn about, pick the brains of estate agents and surveyors.
Read all you can about property valuation and the property market. Keep up to
date by studying all the estate agents' magazines and advertising newspapers.
Get onto friendly terms with a surveyor and valuer, explain that you will give him
regular work in exchange for a discount. I normally get 20% off the usual
valuation fee by going to the same surveyor/valuer that I have used dozens of
times over the past few years.