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What Would You Do with a 'Small Loan' of £1 Million? Mark Barlow, AppLearn

Donald Trump recently stated that he was able to start his real estate business with a loan of $1 million from his father - a sum Mr Trump controversially described as "small". We wanted to gauge the thoughts of business owners regarding the comments, and to find out more about how a loan of £1 million may have benefitted them when starting out. 

Here, we speak to Mark Barlow, Chief Executive of Applearn, a leading provider of user adoption solutions for software as a service - or SaaS - based software applications. The company delivers adoption solutions to more than 4.6 million people in over 34 languages. Mr Barlow started his first company in 1993.


If you were given a loan of £1 million when setting up your business, would you have done anything differently? 

When I started my first company at 33 years old (in 1993), a £1m 'soft loan' (no interest to pay, and no timeline to pay it back) would have been invaluable. The fact is that my IT consultancy business never did have that much money invested before I exited it in 1999. What would I have done differently? Hired more salespeople and spent more on marketing. 

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

A £1m loan in the hands of a novice entrepreneur would be dangerous, and would probably be squandered if I'm honest. The same amount in the hands of a serial entrepreneur would be a totally different thing. So, following that theory, I would make much better use of £1m today than I would have done in 1993. 

How would you have used the money? Would you have spent it on specific purchases? Invested it etc? 

Nothing ever happens until somebody sells something, and nobody has a job unless sales are happening. So I would have spent the majority of the money on sales and marketing (and still would today). 

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

I had no help for the first year. I sold the holiday home, sold the family car, re-mortgaged the house and still took no salary whatsoever for the first ten months. I managed to get a £50,000 loan from Lloyds Bank (Small Firms Loan Guarantee Scheme), which enabled us to move out of my back bedroom and into an office. I repaid that and then took out a further £200,000 through the same SFLG scheme a couple of years later. 

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

Well of course I would have preferred the £1m loan! Although a lot would have depended on what the terms of the loan were (interest rate and repayment period). 

The problem we have here in the UK is that early stage company funding (equity or debt) is onerous in as much as it comes with: a) high interest rates (to reflect the high risk); b) high internal rate of return (IRR) expectations (to reflect the high risk); c) annual management fees (if venture capital (VC) is involved); d) profit and dividend expectations (which suppresses growth); e) one off set-up fees (which reduces the actual sum received - referred to as 'cost of funds'); f) Non-Exec Directors fees (often forced on the company by VC and/or business angels) and so on. 

In other words, the £1m received would be 'chipped to death' by everybody leaving the company with a lot less than £1m to invest. In my opinion, what we actually do is lock our start-up businesses into a straitjacket and expect them to get out there and compete with the world. It is hardly any surprise that we don't have a single solitary 'mega successful' software or internet company in the UK. 

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? 

He's right, £1m is a small amount if you want to set up a serious business. There are, however, many smaller type businesses (perhaps in the retail sector) that would see £1m as a huge amount of money. It all depends on scale! 

What size loan, if any, would you recommend prospective entrepreneurs and business owners seek when setting up a business? Does your business need a loan, or equity? Or perhaps both. 

A loan (or debt) is better because you don't have to give any equity away, but it's worse because you will be saddled with interest to pay. Equity is better because it's risk money in exchange for shares and there is no interest to pay, but it's worse because you now don't own all of your company. You need to work out what mix of debt and equity you need to start up your company. 

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? 

Plan carefully, take advice and don't squander it! Used smartly, it will give you a great start in business.