Loans For The Creative Industries – The Five C’s That Will Get You Yours
How to secure a loan in the creative industry
In the past four years MyCreative Ventures has had close to 500 applicants for their loans.
“About 20% have been successful.” Says Johan Ishak, Executive Director of MyCreative Ventures. After 4 years, RM200 million will have been fully invested in about 100 projects in ten creative industries.
First, he says, “let’s talk about the 80% who don’t make it.”
A Failure to Read the Large Print
A big chunk the applicants who come through the door turn right around and never come back. “We don’t give grants,” says Johan to me as he’s said over and over “on our website, in interviews, in the media… and yet we still get lots of people who come in and act shocked: ‘You only give loans? We wanted a grant’.” And so they leave.
Others are intimidated by the amount of work that goes into securing the loan and decide it’s not for them. The process takes a lot of thinking, paperwork and about three months to complete.
Finally there are the ones who quickly figure out (or MyCreative Venture figures out for them) that their business model is flawed. If they come back it will have to be with a better plan.
The ones who get the loan have thought – or are willing to think – things through. They work with Johan’s team to come up with a business plan for their creative idea. Together they map out the steps that will not only make their dream a reality, but to make it financially viable enough to pay back the loan and profit in the long term. “The process of securing the loan takes about 3 months.”
Qualifying with Five C’s
When considering who to give the loan to, MyCreative Ventures looks at what Johan calls “The 5 C’s”.
Loans depend on repayment so of course MyCreative Ventures looks into how well you have been managing your finances. “We check CCRIs and CTOs,” says Johan, referring to publicly and privately available credit history on companies or individuals.
Don’t worry if occasionally you have not been able to make car payments. “If you miss a month or even a few, but then worked to pay it back, at least we know you take it seriously.” On the other hand, if you have a long-term pattern of non-payment or the bank has taken action against you, it does not bode well.
Whether or not you’re willing to put up some of your own money says how confident you are that you can make it work. MyCreative Ventures requires you to put up a minimum investment of RM20,000.
“If you don’t have it, get partners.” Says Johan, who recommends that at least one of your partners have a business, rather than an arts, background. “If there are 5 of you, you only need to put up RM4,000 each.”
Condition of Business
“We’re not in the business of R&D” says Johan, meaning that the loan is not there to let you give something totally new a go and see if it works.
Instead, MyCreative Ventures looks at experience. What about the work you’ve done so far shows that you can handle this new venture? For example, you are more likely to get funding to open an acting school in Penang if you’ve already been successfully running a similar school in KL for the past few years.
Individual experience also counts. If you and several friends have been conducting popular acting workshops for a while and now want to set up a proper school together, you have some credible background.
This ‘C’ is rather confusing because it’s something MyCreative Venutures doesn’t require from lenders. “Banks will ask you for assets as collateral, we don’t,” says Johan. What they do require is a “personal guarantee from shareholders.” This is because your company has to be incorporated in Malaysia (be a Sdn Bhd company) which means creditors can only come after you for whatever amount your company – not the owners or shareholders – is worth.
MyCreative Ventures requests personal guarantees that shareholders/owners will still service the loan, no matter what happens to their venture.
“This is an important one, I should have started with this,” says Johan. When you apply for a loan from MyCreative Ventures, you will be asked to submit a five-year plan for your business. The plan will show how you intend to start and grow your venture, including where money will come from once it takes off and when you expect to start repaying your loan.
If you need help with this, Johan advises hiring a financial consultant and says MyCreative Ventures can put you in touch with a few names they have on file.
There is funding for the performing arts. For loans, grants, fellowships and other options, check out our Funding page.