Financing Five-a-side Facilities
When it comes to planning the opening of your 5-a-side facility, there are two issues that must be addressed first: the site and the financing.
We already discussed the importance of choosing the most suitable site for the venue in another article, let’s now put our attention to finance.
There are 4 key facts to investigate:
- Your willingness to associate with others
- The sophistication of the local banking system
- Your personal funds
- Your ability to borrow money
Let’s consider the set-up of a 5-a-side facility in a rented warehouse, with 6 courts, a function hall, a pro-shop area, a snack bar, and lockers & showers to be established in France by a French business-creator. Project cost estimated at 600k€.
The first consideration you have to make is whether you would accept to associate others to your business or not.
Associating with others is not just a financial matter; it has to do with the capacity to lead a business, to network with people, to be ready to accept others’ opinion on what you do. Be aware that your associates might want to sell the business, in due time, in order to get their investment back plus a profit: if you are more the “family-business” type of person, be careful when associating and signing a shareholder agreement.
If you decide to associate, define roles and profiles for each of the associates you need, starting from the co-founders to the seed investors, and finally to the investors. Remember that investors fund people, not ideas, so try to get valuable people on board as co-founders, because the will reinforce your proposal.
Second information to have is about the local banking system: what do they require to grant you the loan you need? Guarantees, a percentage of risk capital on the total investment, cost of funds, counter guarantees options are all important to structure your funding strategy. If the bank won’t assure more than 50% of the total funds, then you need to find 300k€ to aspire to a loan.
Third consideration you have to make regards your personal funds: how much of your personal wealth you want to put at stake? Will your family support you? This point takes you straight to the fourth issue…
If you decide to associate, are you reputed enough, and are you competent enough to convince a bank, or to attract investors on the basis of a company valorization that is higher of the cost of the project, so that a lower investment on your side may still leave you with the majority of the company?
The four-point analysis shows that the funding process involves two major qualifications:
- You must prove to be competent
- You must have a reputed team to help you defend your project, either if you want to convince a bank or attract investors.
WSBSPORT is your natural business partner and advisor, ask us how we can help you open your 5-a-side center!