Getting your hands on extra funds isn't easy, but it can be done if you do your homework, says Jac Roper

Sometimes you have to spend money to make money. All of the convenience groups will attest that store improvements reap the rewards of improved turnovers and profits.

But just as making the second million is easier than the first, so raising finance is only simple if you have a thriving business. If you are a small, struggling independent looking to improve either via new equipment, a refit, or extending your premises, you will need some meticulous planning in place to persuade the financial institutions that you are more than a good bet - even though, by their very nature, they are in the risk business.
If you've got a good track record with your bank then that's still the easiest and most straightforward way to borrow money, and probably the cheapest. Like anything else it may be open to negotiation as well. Generally, the more security a business can provide, the better the terms of the loan (eg lower interest rates).

It is said that the loan market is very competitive at the moment so, as always, the advice is to shop around. There are institutions out there wishing and wanting to lend you money.

Banking on it

Kent retailer Ian Florey raised £80,000 in financing through HSBC. Ian, who previously worked as a buyer with Spar and as a wine buyer with Unwins, says he saw some of the big cars the retailers were running and thought, hmm, there's something there.

He eventually took on an 850sq ft Mace store in Sissinghurst, which was only doing £4,000-£5,000 a week. Fifteen months ago he switched to the group he knew so well, Spar, and with some finer attention to detail turnover went up to £8,000-£9,000.

"I knew it needed a refit," says Ian, "so I put together a business plan. But I had to present it three times. The bank was very insistent that I think it through carefully. My accountant came with me the third time and it was accepted. Some of the collateral is against my house."

Ian got a 10-year loan at 2% over base, which isn't bad. He saw a commercial manager at the Ashford HSBC branch and the final decision rested with that manager, so there was no referring upwards. He had a bit of help from his Spar wholesaler, Capper & Co, which came up with some drawings of a cleverly designed 'extended' store (by just 50sq ft) and useful extras like the demographics, the recommended store hours, the possible add-on services and a formula of how much the business might grow as a consequence of the changes.

"You need to show the bank your drawings, show them your vision," says Ian. "The bank manager visited and it was useful that my business development manager from Spar was on hand to talk to him."

The week before we spoke to Ian he had witnessed his best week ever - a turnover of £16,800 in the first week in September, literally double that of 18 months ago, pre-refit.

"I'm about to go into phase two now," he says. "This will add another 50sq ft to the sales area so I can introduce an all-singing-all-dancing food-to-go area. I am going to try to self-fund it this time, even though the bank has said we're here to help if you need us!"

Londis retailer Sunder Sandher was one of the first to use his group's discounted deal of a five-year loan offered through Lombard Finance to raise £80,000 for a big refit. "I gave them £8,000 and they raised the rest," he says. "I could have had 100%, but I wanted the VAT receipts. All I had to do was get an estimate from a shopfitter. Then there are two options: either you provide end-of-year accounts, or the past three months' bank statements. I went for the last three months option."

He adds: "Being in property myself, I knew what questions to ask and Lombard's fee was a sensible one. There was no hassle, no paperwork and they don't release the funds until you approve the work. It was all approved within a couple of days."

Sunder's sales are up by 30% and he could pay off the refit costs out of the increase within a year if he wanted to.

On the money

Specialist independent finance house Henry Howard has about 1,200 convenience stores on its books. It works in partnership with a number of symbol groups including Booker Premier, P&H and Nisa, but works most notably with the Costcutter group.

"We have arranged finance for about 400 Costcutter retailers over the past year," says Mark Crook, sales and marketing director. "We have raised anything from £1,000 for new chillers to £250,000 for a full refit. We are probably the biggest funder in the convenience market."

Kevin Widdrington, director of IT at Costcutter, says: "It started with too many retailers getting turned down for finance for epos systems. Now Henry Howard handles virtually all our financing. They are very hard-working, flexible and their rates are superb."

Potential providers of funds need to see your business vision written down in a concise yet detailed fashion. Obviously, your lender will want to know what you are going to spend the money on and how it will improve your situation.

You will need to include a brief history of the business and its performance to date, which means a five-year profit-and-loss account and balance sheet and cash-flow history and forecast. Outline the market, your key members of staff and your professional advisers (accountant, solicitor and so on).

A business plan is vital to secure a loan. It should include the following: an executive summary of not more than two pages; short description of the business opportunity; your marketing and sales strategy; your management team and personnel; your operations (premises, IT, catchment); and financial forecasts (monthly profit and loss, cash flow, balance sheets).

Once you have written all this as a first draft then create your two-page summary which includes your position, description of your services, sales forecasts, short- and long-term business aims and a breakdown of how the money will be deployed and repaid.

Free money

The grants picture for independent c-stores seems similar to the 'free lunch'. There are some grants available to small businesses from a variety of sources including the government, the European Union and certain charities, but they seldom include grocery businesses and they are doled out on a local basis.
A punt around information resource site will help you assess whether you might qualify and, as Shane Brennan, public affairs manager at the Association of Convenience Stores, says: "It is always worth a call to the local council to see if there is anything available for improvements. And Business Link is there to provide support to small businesses including advice on funding." 

Sean Carter, chief executive officer of the Rural Shops Alliance, says the grants are going to the wrong places: "There are grants for the community shops - of which there are only a couple of hundred - run by volunteers paying peppercorn rents. There is lots of money for that sort of operation.

"But for commercial operations there is no national pot, even though they need it just as much, if not more. There are just some small amounts available through district councils. Wiltshire has a scheme to fund certain improvements like epos, but it is scattered.

"We are looking at a funding scheme with South-west Regional Development Agency to provide grants in the West Country where they desperately need it."

Not only is it rare to get a grant, it will seldom be for more than 50% of the project costs, so you will need to consider how you will match the funding. 

And it is important to remember that, if you do get a grant it will take time to get it processed. Don't start work until the paperwork is completed as no grant scheme will reimburse you for any money spent before the application has been approved and processed.

Online advice

There is online help. The loan guarantee scheme booklet, from the DTI, is downloadable from And Business Link, the government's business advice service (, has a downloadable guide to funding.

It offers advice on:
-The importance of seeking professional advice from accountants and banks
-The value of a strong business plan
-Self-funding for your business
-Obtaining loans and overdrafts from the bank
-Accepting finance from family and friends
-Government grants and who may be eligible
-When and how to seek small-scale equity investment
-Dealing with cash flow issues.