business
DESCRIPTION
TRANSCRIPT
- 1. Business FinanceOptions The Choices Simplified Business Link
2. Introduction Mike Stutter & Andy Weeks Business Finance Advisers 3. Agenda
- Finance - what are the options?
- Expectations of funders
- Debt and Equity
- Government & Regional finance schemes
- Preparing for funding & business plans
- Conclusions and next steps
4. Finance- what are the options?
- Debt and Equity main concepts and differences
- The affects of equity dilution and the risks of debt to a company
- Financing must be driven by the business strategy, not vice versa
5. Types of Finance
- Bank Lending - Overdrafts & Loans
- Enterprise Finance Guarantee
- Asset Finance
- Factoring and Invoice Discounting
- Regional Funds & Secondary Lenders
6.
- Historically provide Overdrafts and Loans
- Requirements :-
- Demonstrable ability to repay
- Tangible Security e.g. Freehold Deeds, Life Policies ,personal guarantees etc.
- Financial Viability (Ratios)
- % margin above base rate
- Track record
Banks 7. Working Capital
- Debtors
- Stock
- Work in Progress
- Creditors
8. Ratios
- Stake
- Current Ratio (Assets V Liabilities)
- Net Worth (Solvency)
- Interest Cover (Serviceability)
9. What banks really dont like!
- Lack of track record
- Start ups - no sales yet!
- Lack of available security against lending
- Poor credit history of the company itself or its directors personally
- Higher risk proposals
10. Asset Finance
- Purchase of Equipment
- Refinance of existing equipment i.e. buy back
- Security is the asset but additional security may be requiredsuch as personal guarantees or charge over property.
11. Factoring and Invoice Discounting -
-
-
- Finance is tailored to working capital needs
-
-
-
- Automatic support for growth
-
-
-
- Security is the invoice raised
-
-
-
- Leaves other business assets available as security
-
-
-
- Care old perception of factoring is lending of last resort
-
-
-
- Customer relationships may be damaged (factoring)
-
-
-
- If sales reduce , the facility will reduce.
-
12. Enterprise Finance Guarantee (EFG)
-
- Replaces SFLGS
-
- Accredited Lenders
-
- Min 1K Max. 1m
-
- Currently 75% of debt guaranteed by Government
-
- Premium of 2%is payable
-
- New credit lines & refinancing of existing overdrafts permitted
-
- Personal Security allowable but unsupported
13. Regional Schemes & Secondary Lenders
- South West Loan Fund
- Small Loan Scheme max 50k
- Business Loan Scheme - 50k+
- Max 5 years
- Solvent growth businesses
- Carbon Trust Loans - Equipment
- Other Locally Based Regional Funders e.g Enterprise Development Funds
14. Grants
- R&D Grants
- Grant for Business Investment (GBI)
- Business Link Web Site-Grant search
15. Equity and where to find it
- The nature of company ownership
-
- Must be Limited Company
- Sources
-
- Venture Capital and private equity
-
- Business Angels
-
- SWAIN
-
- Large accountancy practices
-
- Beer & Associates
-
- Friends, Family, Staff
16. Equity - statistics
- Only 6% of private equity is invested in start-up or early stage companies
- Most equity is invested in more mature, larger companies
- Success rates with applications for funding = 1% with VCs and 5-10% with business angels
- So its not that easy to get equity funding!
17. Expectations of funders - equity
- Equity investors
-
- Exit strategy - Trade sale, Management Buy Out, or Flotation in 3+ years
-
- Realistic Valuation
-
- High Returns required
18. Equity
-
- No interest cost
-
- No security needed
-
- No repayment of capital
-
- Potential skills of investors, or strategic partner
-
- Leverage for debt
-
- Dilution of ownership
-
- Cost (high returns demanded)
-
- Lead time to obtain it
19. The funding process and costs
- How long it takes to raise debt or equity
- Negotiation of terms
- Due diligence - lots of questions
- Legal documents far more if you are raising equity
- Costs - manage them proactively
20. Business plans and forecasts - getting them right
- Contents -10/12 pages +appendices as appropriate
- 2 page Executive summary
- Do It Yourself! - must be written by management, not by your accountant
- Use an accountant to help produce the financial forecasts
- Refer to BUSINESS LINK website for guidance
- Be clear on product and route to market
21. Conclusions
- Successful debt or equity fundraising depends on the following ingredients:
-
- A well defined business strategy
-
- A well prepared business plan
-
- Robust and deliverable forecasts
-
- Firm negotiation of terms
22. Questions ?