raising finance to fund business growth

Raising finance to fund business growth

Dan RobertsHead of Debt ProductsBarclays Commercial Bank

Types of finance available for small business growth

Where to source your finance

How to choose the right finance option for your business

Steps to undertake when sourcing finance

Types of finance available for small business growth

Where to source your finance

How to choose the right finance option for your business

Steps to undertake when sourcing finance

Types of finance available for growth

- Personal savings and assets- Grants & awards- Bank overdrafts- Bank loans & commercial mortgages- Credit cards – personal or business- Sales ledger finance (factoring & invoice

discounting)- Leasing- Business Angels

Using personal finance

All businesses will have an element of personal wealth invested in them. Often this happens a start-up stage

Most business owners have used personal finance at some point to fund their business

“At the start I needed the funds but I couldn’t get a loan because I

had no credit history”

“It was easier and less complicated than taking out a

loan ”

“The bank turned me

down for a loan last year, so I used personal funds instead”

Using grants and awards

Grants are usually project specific

Awards …Check out what your Local

Enterprise Agency can offer

Using overdraftsThe majority of respondents said that they would primarily consider an overdraft facility

for cash flow purposes

Other reasons included:

‘As a back up if a bit low on funds one month’

‘Only if really desperate as its so expensive’

‘Short term investment’

‘To buy materials’

Several respondents said

that they wouldn’t consider an

overdraft

“I wouldn’t use it for psychological

reasons. You would always feel that you

were paying off debt”

Using bank loansSecured or unsecuredThe majority of respondents would consider a bank loan for the purchase or rental of bigger business premises to expand the business

“Yes, I have one, which has helped me expand”

“To buy our specialist vans and vehicles”

The other significant consideration for a business loan was the purchase of equipment to help with the business, including vehicles

Using credit cards – personal or business

Using sales ledger finance

Insert QT Care case study

Using leasing

Insert Mavericks case studyBrimur case study

Using business angels/ equity

Types of finance available for growth

- Personal savings and assets- Grants & awards- Bank overdrafts- Bank loans & commercial mortgages- Credit cards – personal or business- Sales ledger finance (factoring & invoice

discounting)- Leasing- Business Angels

Most businesses use a mix of finance

Insert Flowflex case study

Types of finance available for small business growth

Where to source your finance

How to choose the right finance option for your business

Steps to undertake when sourcing finance

Growth Plans: Main Sources of Finance% of respondents planning to grow

Source: Business Change Survey

Retained earnings

Main bank: loan

Main bank: overdraft

Other bank: loan

Commercial mortgage

Government grant

Leasing

Factoring

Equity: personal

0 10 20 30 40 50

Types of finance available for small business growth

Where to source your finance

How to choose the right finance option for your business

Steps to undertake when sourcing finance

So you need finance, do you?

What do you want finance for?• Buying an asset• Improving cash flow/ working capital• Funding growth

a) UKb) Overseas

How much do you need?• Have you budgeted for all costs & contingencies

When will you be able to repay it?Other considerations

• Pension planning (SIPPs and SSASs)• Tax planning

Each of you will have different needs

Get expert advice

Use online tools such as Barclays’ Borrowing Solutions Finder

http://www.barclays.co.uk/lending/home_step1.html

Premise Use: Plans, advice/ support% of respondents planning 'significant' change

Source: Business Change Survey

Main bank

Accountant

Business support body

Solicitor

Other bank

Estate agent

0 5 10 15 20 25 30

Find out if you qualify for any grants

Use online tools like Business Link in particular to find out about grants

http://www.businesslink.gov.uk

What factors influence whether you decide to take a loan?

Affordability is the primary reason

Closely followed by flexible repayment terms 1

1

2

2

3

3

9

11

0 1 2 3 4 5 6 7 8 9 10 11 12 13

Excellent customer service

A personal banker

Fixed rates

An understanding lender

My circumstances

Nothing

Flexible repayment options

Affordable interest rates

Influential factors

Lending products considered vs. used

Loans and overdrafts remain the most popular products

Nearly half those who considered a business loan did not actually take one

2

2

3

4

4

8

14

2

0

4

2

4

6

8

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14

My own money

Grant

None

Personal Loan

Credit card

Overdraft

Bank Loan

Products usedProducts considered

Types of finance available for small business growth

Where to source your finance

How to choose the right finance option for your business

Steps to undertake when sourcing finance

Top tips

Get expert advice at every stage of the process

Check your business plan

Try and put yourself in the shoes of your potential investors and lenders: what will they want to see? What are their expectations?

If you need to raise 3rd party funds, what is your “skin in the game”?

Minimise your financing requirements by making your existing cash work harder, eg keep on top of your accounts receivable.

Some common pitfalls

planning

What are your goals & ambitions? Are these supported by a realistic written business plan?

Have you worked out what is the necessary cash flow for your business? How much funding you need? How much do you already have?

What are you going to do with the money? How will it help your business grow?

If you are purchasing an asset, have you taken into account all the upfront and ongoing costs to see how much you need to buy your business premises.

Think about the future.

Online resources e.g. Clearlybusiness

• Tools and services

• Advice and guidance to help you succeed.

• Whether you are just starting out or you are looking to grow your established business

http://www.clearlybusiness.com

Types of finance available for small business growth

Where to source your finance

How to choose the right finance option for your business

Steps to undertake when sourcing finance

Questions?