Yorkshire Post 16/04/13

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Nick Moules
16th April 2013

By Suzan Uzel. Published on 16/04/2013 00:01

EXQUISITE Handmade Cakes is seeking to raise £50,000 to finance the purchase of new machinery via peer-to-peer online business lending platform rebuildingsociety.com.

Daniel Rajkumar & Viv Parry

The Leeds-based cake maker, which was founded by Viv Parry in 2004 and employs 30 people, hopes to generate extra sales by investing in a fully automated cake cutting machine.

Exquisite Handmade Cakes is “at a critical growth stage”, said Ms Parry, adding that she expects to grow its £1.6m annual turnover by 10 per cent this year.Ms Parry said the business “hit a brick wall” in its efforts to borrow from traditional lenders. “There’s a very poor attitude out there at the minute. No-one wants to take a risk on anything,” she said.

“We have done the classic grow, grow, grow and then hit a plateau,” she said.

Rebuildingsociety, which was founded in December 2011 by Leeds University graduate Daniel Rajkumar, helps businesses raise funds through its online community. The Leeds-based business has now secured five deals, meaning that more than £180,000 has been made available to borrowers through the platform. Mr Rajkumar said: “We forecast that we will have loaned £1m by the end of May, £10m by the end of the year and circa £100m by the end of 2014.”

Last year saw Exquisite Handmade Cakes carry out a board restructure, with investment going into marketing and staff training.

The business made a loss due to the investment, said Ms Parry, but the firm, which has a history of profitability, is back in the black now. Buying a fully automated cake cutting machine will help the firm win new business.

Ms Parry explained: “It will pre-portion round cakes, the kind that appear in coffee shops, so that customers get guaranteed portion sizes. We know there’s a massive market for pre-portioned products.”

The business currently has semi-automated machinery of this kind, but it can’t keep up with demand. She added: “We don’t buy machinery with a view to laying people off, we buy machinery so we can take on more work.”

Exquisite Handmade Cakes supplies customers including contract caterers, schools and hotels via a network of distributors, as well as a ‘food to go’ range direct to clients such as First Hull Trains.

It has also recently started supplying Waterstones, while its cakes are also available at Leeds Bradford Airport’s Premier Lounge. The plan is to begin exporting with markets such as the United States and Iceland on the agenda.

Ms Parry, who is a chartered accountant, is keen to attract investors with an interest in her business via rebuildingsociety to achieve her plans for growth. The bid is expected to go live this week.

“What’s attractive to me, as a consumer-facing business, is to get people on board investing who have also got an interest in the business.

“If I go to the bank and they lend me some money that’s where it starts and finishes, whereas say I get 100 investors in my business they all have an interest in it and as I’m building the brand and building more consumer focused activity then hopefully the two will go hand in hand.”

Ms Parry, who is the managing director and owner of Exquisite Handmade Cakes, added that she had approached banks and “other avenues”, but that they either consider the business “too risky” or investors want to take a large equity share.

She said: “I’m doing something for my future, for my employees’ future, potentially for my daughters’ future, I don’t want to start carving that (the business) up.”

Businesses can borrow between £2,000 and £50,000 via rebuildingsociety and individual lenders can lend between £10 and £2,000 on any one bid, but can place multiple bids.

Firms apply to be listed on the online marketplace and must meet certain criteria, including being two years of age, limited and profitable. Once the business is listed lenders will propose an interest rate according to risk and firms can decide whether to accept. Mr Rajkumar said: “We’ve taken over 1,250 registrations, of which 457 are lenders.

“The average interest rate is 17.2 per cent. We’re finding that borrowers prefer to make higher repayments to a community of people who offer more support than institutional finance.”

Originally published in the Yorkshire Post, 16 April 2013 and online here: http://www.yorkshirepost.co.uk/business/business-news/old-lenders-won-t-take-risk-says-cake-boss-1-5586801#.UW0cPG3h6CE.twitter

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