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What would you do with a 'small loan' of £1 million? Mike Blackburn, I-COM

In late 2015, Donald Trump famously revealed he was able to start his first real estate business with the help of what he described as a "small loan of $1 million" from his father. The comments understandably caused much controversy. We wanted to ask local business owners in the UK for their thoughts on the comments and how a £1 million loan would have helped or hindered them when first starting out. 

In the latest post in the series, we speak to Mike Blackburn, Managing Director of I-COM, a full service digital agency. Established in 2004, I-COM has grown to become one of the largest independent digital agencies in Manchester, providing everything a business needs in order to operate effectively online, from website build and promotion to content marketing and PR.

  

If you were given a loan of £1 million when starting out, would you have done anything differently? 

Yes, we would certainly have spent more on advertising, marketing and sales in order to help the business grow even faster. Promotional budgets always seem to be the first things that are forsaken when a business has to keep control of costs, but they have the biggest potential to add value if used properly. 

We would also have invested in the development of tools and products and services that could help our business differentiate itself. Shortage of cash definitely stopped us from doing this in the early years. It's only now, after being established for over ten years, that we have the capital behind us to develop these things that add value and recurring income. 

What difference would the loan have made? Would it have made things a lot easier? Why? 

It would have made a big difference. We pride ourselves on always having paid the people who work with us on time. Sometimes, in the early days of the business, cash was very tight and we simply didn't have enough in the bank for the directors to get paid. More cash in the business would have relieved an awful lot of pressure in those early days. 

How would you have used the money? Would you have spent it on specific purchases, or perhaps invested it? 

We're a people business and if we'd had more money at the outset that's where we'd have put it. We would have invested in programmers to develop our tools and products more quickly and we'd have invested in a stronger sales team to get out there and drive revenues. 

We wouldn't have invested in property, but would simply have used the cash to drive the business harder and faster.  

How did you start your business? What financial help, if any, did you receive? 

The business was originally funded by the directors' savings and a bit of family money. Unfortunately, that money came very close to running out before we got to the point of being profitable. 

We were then very fortunate that we discussed our situation with our largest client; we wondered if they might have any angel investor contacts who would support us as we saw a rosy future ahead. Because they loved what we were doing for them, the client then did something we'll always remain thankful for - they gave us an interest free loan to help us keep going to be repaid when we could afford it. In return, they took a stake in the business. 

I'm pleased to say that after a couple of years we were able to pay back the loan and buy back the client's shares at a price they were more than happy with. I'm also extremely gratified to say that the person who helped us out remains one of our most important clients to this day. 

Are you pleased you did things the way you did, or would you have preferred to have received a huge loan instead? 

I'm pleased we did things the way we did. Managing our cash carefully helped us get the business on a solid footing. It may have been at the expense of some growth but we're pleased to have built a strong business that has been able to weather some very difficult economic times. 

We're very proud of our people and the passion they have for delivering results whilst having fun. I suspect that more freely available cash might have led to a slightly different culture where people didn't invest so much of themselves in making sure a job was done well. 

What are your opinions on Donald Trump's comments suggesting he considers a $1 million loan small? Would you agree that it is 'small', or would you consider it a significant advantage when trying to get ahead? 

For someone working in property development, even all those years ago when Donald Trump started, I don't think $1 million is a lot of money. 

However, for someone contemplating establishing a people-based business, it could fund several people for a few years as they strive to generate revenues. 

On balance, though, I think everyone would agree that having that amount of seed capital should give a significant advantage - it all depends on how you use the money.   

What size loan, if any, would you recommend prospective entrepreneurs and business owners seek when setting up a business? 

Borrow only what you need to deliver your plans. 

What advice would you give to other would-be entrepreneurs and business owners just starting out? What would you advise if they were presented with a loan of £1 million?

Make sure you have the money you need to deliver your business plan but don't borrow more than you need or you risk becoming complacent, taking your focus off collecting what people owe you. 

Cash is king - make sure you have enough to cover any loan repayments to which you're committed. Loans generally incur interest that needs to be paid (as well as any capital repayment). If you can't satisfy the repayments due to a cash shortage, you risk losing everything you've worked for.