finance in cornwall 2015 segment 2a
TRANSCRIPT
FFinance in Cornwall 2015
“71% of SMEs approach only one provider of finance”
Ivan Burnard – Partner
Start Ups and business trading for < 2 years
www.francisclark.co.uk
Structure of morning
• Background, EU “calls” and the Banks (8:30am to 9:42am)
• LEP, Cornwall EU millions and “calls”• Banks and SMEs• Company presentation
• Grants, debt, equity and business support – stratified by age of business (10:02 am to 11:22 am)
• Secured finance, alternative sources of finance, business support (11.42 am to 1.00pm)
• State Aid• Company presentation
• Q&A one to one / Networking (1pm to 2pm)
www.francisclark.co.uk
Funding and support – for business <2 years old
• 6 to 8 minute presentations on:
• “Investment ready” x 2• Start Up Loans (loan)• Legal structures*• SW Loan Fund (loan)• A business angel network for Cornwall (equity)• Get Set for Growth (support)• VAT*• Tax on Profits and SEIS*
(* = inherited slots from “Start Up Cornwall”)
Getting investment ready
Nicky CornishCorporate Manager
www.francisclark.co.uk
Matching requirements
Understand your
requirements
Understand funding
options and funders
requirements
www.francisclark.co.uk
The Readiness Process
• When, why and what funding is needed (Projections)
• Communicating the business proposition (Business plan and projections)
• Viable plan and credible management
• Building the relationship
www.francisclark.co.uk
Investment ready – housekeeping
• Compliance and Legal
Licences / contracts/ legal title?
IPR ownership in the company?
Statutory Accounts/management accounts
VAT, PAYE/NI, Books and records in order?
www.francisclark.co.uk
Requirements: Grants
• “Project” eligibility – sector, size, location…
• Timescale – prescriptive, process and panels, not retrospective
• Match funding
• ‘Need for grant’ versus viable proposition
• Other factors - Environment, Equality, on going requirements
www.francisclark.co.uk
Requirements: Debt
• Serviceability & Headroom
• Security / Personal Guarantees
• Conduits for government initiatives
• Covenants – achievable / appropriate?
www.francisclark.co.uk
Requirements: Equity
• Exit route and returns to the investor
• Investors expertise vs. loss of independence?
• Be prepared to discuss valuation
• Be aware of FSMA regulations
www.francisclark.co.uk
Investor Ready - Conclusions
• Appropriate funding / understand the funder
• Sufficient information for a risk assessment
• Know the ‘deal breakers’
• Be prepared for “due diligence”
• Build in sufficient time
• There is assistance out there…
www.francisclark.co.uk
“You are often trying to persuade a stranger to give you somebody else’s savings…”
Who are SWIG
Finance?
We finance businesses looking to
Start Up or Grow.
+ =
Business Support Growth
The Start Up Loans Scheme
A government-backed loan scheme offering
business advice, a loan and on-going mentoring
support.
The Start Up Loans SchemeKey Points• Available to start ups and
businesses trading less than 24 months
• Available to all sectors• UK-wide, government scheme• SWIG Finance is the South
West delivery partner
Get in touch
www.swigfinance.co.uk
01872 223 883
SWIG Services LtdLowena House, Glenthorne Court, Truro Business ParkThreemilestone, Truro, Cornwall, TR4 9NY
LEGAL STRUCTURES12th May 2015
Gavin Poole
Drivers
• Why go into business?• Tax• Liability• Current issues:
• Global: jurisdictions• Local: philanthropy
Basics• Vehicles
• Sole trader• Partnerships...• Trusts...• Companies...• LLPs• PLCs• Charitable Incorporated Organisations• Community structures
• Overlays• Models
Models
• [collaboration, joint venture, other] agreements• Agency/distribution agreements• Franchises• Licences• On-line arrangements
Sole trader
Partnerships
• Partnership Act 1890• Joint liability with partners• Each partner is an agent of the
partnership• Partnership can be dissolved at will• Profits and capital split equally (unless
clear evidence to the contrary)• No valuation of partnership share • No restriction on competition
Partnerships• Partnership Act 1890
• Joint liability with partners• Each partner is an agent of the partnership• Partnership can be dissolved at will• Profits and capital split equally (unless clear evidence
to the contrary)• No valuation of partnership share • No restriction on competition
Partnership case study
• Tim, Euan and Amanda• Growing business• Recruitment sought• Euan’s change of heart• Now need two partners• Euan has become a troublemaker
• Euan cannot be expelled by the majority• Euan can dissolve the partnership at any time• Block on much needed recruitment• If Euan has a lesser entitlement, unfair gain• No mechanism to value Euan’s interest• Euan could set up next door and threaten the existing
business.....ouch
Note to Tim and Amanda: all of these could have been covered in a partnership agreement...double ouch!
Companies• Model articles
• Generic• Industry blind• Limited provisions for:
• Directors• Shareholders• Administrative arrangements
• As shareholders1. Decisions: show of hands (unless a poll is
demanded)2. Quorum: two (unless single shareholder)3. Chairman: chairman of the board/person appointed
by the meeting/the directors present
Companies• Model articles
• Generic• Industry blind• Limited provisions for:
• Directors• Shareholders• Administrative arrangements
• As shareholders1. Decisions: show of hands (unless a poll is
demanded)2. Quorum: two (unless single shareholder)3. Chairman: chairman of the board/person appointed
by the meeting/the directors present
Shareholder case study
• Charlotte, Andrew, Keith and Evelyn• They each own 25% of the company• Approaching 40 employees• Keith is a workaholic...and dies• Keith’s widow has never run a business• Keith will leaves a legacy to a charity and his wife is the
main beneficiary
• Keith’s shares are in probate• Widow (and charity) wants money for the shares• No mechanism for valuing shares• Shares could be sold to the highest bidder• Remaining shareholders may not be able to afford to buy• Widow will need to get involved in the business• Widow/charity could block major decisions...until monies distributed
Note to all: all of these could have been covered in a shareholders agreement... ouch!
LLPs
LLPs
• Limited Liability Partnerships Act 2000• Retirement on death, dissolution or the giving of “reasonable notice” to members
• Nominating designated members• Sundry administrative arrangements
• Combination of previous
Community structures
• Co-operative societies• Community benefit societies• CICs
• Preservation of community assets/amenities
• Stephens Scown - first in Cornwall
Summary
• Structures are plentiful• Structures are good• Documented relationships give clarity• The journey is helpful• Insurance is in place
• Lack of clear structure will become a problem• It is a false economy not to have structures
Stephens Scown Start-up package
• Bespoke• Covers key issues • Cost effective• Swift turnaround
• Apply to Stephens Scown Cornwall Corporate Team:[email protected]
The information in this presentation is intended to be general information only and should not be interpreted as legal advice.
English law is subject to change so whilst Stephens Scown LLP seeks to ensure the information contained in this presentation is
up to date and accurate, the law can change quickly and no guarantee is made as to its accuracy which means the
information should not be relied upon. Presentation slides should not be viewed as an alternative to professional advice
and Stephens Scown LLP does not accept liability for any action taken or not taken as a result of this information.
Tax on profits and SEIS
Daniel Orasnjak, Tax Manager
www.francisclark.co.uk
Tax on profits (basics)
• Profits – generally accounts profits but adjust for:
• Depreciation (replace with Capital Allowances)
• Non-tax deductible expenses
• Sole trader/ Partnership / LLP – your share of profits taxed as personal income (Income Tax)
• Personal Allowance - £10,600
• Basic Rate - (£31,785) 20%
• Higher Rate Band (£31,786 - £150,000) 40%
• Additional Rate (>£150,000) 45%
• Class 2 NIC - £2.80 p.w
• Class 4 NIC - (£8,060 - £42,385) 9%
(>£42,385) 2%
www.francisclark.co.uk
Tax on profits (basics)
• Company – 20% (Corporation Tax)
• Company money is not yours!
• Extraction: Salary, Dividends, Rent or Loan
• Dividends
• (Within Basic Rate) 0%
• (Higher Rate) 25%
• (Additional Rate) 30.55%
Comparison of structures for tax
Taxable Profits
Sole Trade/Partnership
Tax
Company Tax
£40,000 £8,900 £8,000
£100,000 £33,789 £20,000
£150,000 £59,029 £30,000
www.francisclark.co.uk
Seed Enterprise Investment Scheme• Rate of income tax relief – 50% up to maximum per investor of
£100k per year
• Capital Gains tax relief – 50% relief on capital gains realised on asset disposals used to make SEIS investment. Exemption for gains on SEIS investment if tax relief income tax relief claimed
• Mandatory investment period – 3 years
• Qualifying investment
• Cash for ordinary shares in unlisted company
• < 25 employees
• Net Assets < £200k
• Carrying out permitted activity
• Not controlled by another company
• Trade < 2 years old
• Raise a maximum of £150k under SEIS
www.francisclark.co.uk
SEIS/ EIS Qualifying activities
Trade carried on a commercial basis with a view to profit
Not permitted activities include:
• Dealing in land, shares and other financial instruments
• Banking and other financial activities
• Dealing in goods, other than ordinary retail or wholesale activity
• Letting or leasing assets on hire
• Legal and accountancy services
• Hotels/Care Homes
www.francisclark.co.uk
SEIS/ EIS: Conditions for The Investor
• Non-employees (Directors deemed not be employees)
• Must not hold >30% (with associates) of share capital, voting power or entitlement to the assets on a winding up, during the investment period
• Must subscribe for genuine commercial reasons and not as part of a tax avoidance scheme
www.francisclark.co.uk
SEIS/ EIS: Further Considerations
• Get HMRC clearance re “permitted activities”
• Forms/ paperwork to HMRC
• Maintain qualifying company status for 3 years
www.francisclark.co.uk
Enterprise Investment Scheme
• Rate of income tax relief – 30% up to maximum per investor of £1m per year
• Capital Gains tax relief – Hold Over relief. Exemption for gains on EIS investment if income tax claimed
• Mandatory investment period – 3 years
• Qualifying investment
• Cash for Ordinary shares in unlisted company
• < 250 employees
• Net Assets < £15 million
• Carrying out permitted activity
• Not controlled by another company
Jess Ratty, Crowdfunder
About Crowdfunder
A community of over
150,000crowdfunders
Supporting over
11,000projects
Raising over
for UK crowdfunding
£4million
Today
community groups, charities,start-up businesses and people with
great ideas started projects with us . . .
124 Project numbers
growing
400% every year
What is crowdfunding?There are three different types of
crowdfundingEquity Lending Rewards
• Sell a % of your established business
for money
• Dragons’ Den
• Borrow money online from lots of people
rather than the bank
• Peer to peer
• Minibond
• Only type that helps start-ups
• People pledge money in return for rewards
• Crowdfunder has raised over £4M for
1,000’s of UK projects
Rewards crowdfunding is best explained by example
1. Phil from Leeds wanted to start up a bakery
2. He needed £8,000 to purchase a bread oven
3. The bank wouldn’t lend
4. He created a project on Crowdfunder
5. And raised over £8,000 from 114 people
“Pledge £100 for a loaf of bread every week for a year”
Benefits to the projectsIt’s so much more than money . . .
Validation
Marketing
Funding
Advocates
The Crowdfunder Academy
We work with crowdfunding projects to ensure they have the greatest opportunity to
be a crowdfunding success using a range of proven tools and
tactics• Online guides
• Videos• Tutorials
• Workshops• Telephone support
Some of our partners
Charities 4,000 children
had a Christmas
Individuals Our British athletes
went to the Winter Olympics
Enterprising start-ups
flourished
Community Football was
brought back to
the community
Innovative businesses are making waves
Project impact
VAT
Julie Towers, Partner VAT Services
May 2015
www.francisclark.co.uk
VAT registration
• Taxable income
• Threshold £82,000 from 1 April 2015
• Last 12 months
• Next 30 days
• Exemption if income predominantly zero-rated
• Exception if ‘one-off blip’ and turnover in next 12 months is expected to be below deregistration threshold (£80,000).
www.francisclark.co.uk
VAT registration
• Voluntary registration can be requested where it is advantageous to register before the threshold is breached
• Only zero-rated income
• Recovery of VAT on expenditure
• VAT can be recovered on expenditure incurred by the taxpayer before registration
• Services in previous 6 months
• Goods purchased in previous 4 years
• VAT can be recovered on pre-incorporation expenditure in certain circumstances
www.francisclark.co.uk
Overseas issues
• Purchase of goods from EC suppliers can trigger liability to register in the UK
• Similar rule for services from any non-UK supplier
• EORI required for import of goods from non-EU country
• Most income from overseas customers counts towards the VAT registration threshold. Exceptions:
• Most services provided to businesses in other EC countries• Most services provided to any customer outside the EC
• Additional compliance for trade with EC countries
Business Support & Equity Investment
Francis Clark - Finance in Cornwall Tuesday 12th May 2015
Matt Giles – Programme DirectorJohn Acornley – Business Equity Finance Advisor
#getsetforgrowth
The Investment Readiness and Growth Service for
ambitious businesses in Cornwall and the Isles of Scilly
GetSet Business Support
Bespoke & Impartial 1:1 Advice
Investment Readiness
Finance Support
Marketing & Sales Support
Business Model Validation
GetSet KnowHow
Angel Investor Network
Equity Investment Advice
Mentoring Service
Non-Exec Director Network
KnowHow Board
What we do..
Businesses Supported: 220 (20% start-up, 80% existing)
Finance Secured: £2.4m (debt, equity, grant, crowd)
Current Finance Pipeline: £1.1m (applications pending)
Jobs Created/Safeguarded: 190
Combined Turnover: £39m
Achievements to date
1 in 5 are unsure of best route to finance
45% have never applied for any source of external finance prior to engaging with GetSet
50% of business relied solely on personal savings to finance their business
GetSet funding success rate is 98%
Business Insight
Equity Investment
John Acornley - Business Equity Finance Advisor
#getsetforgrowth
Angel Investment
Private Equity/Venture Capital
Equity Crowdfunding
We have built a network of equity investors who wish to invest in businesses based in Cornwall & Isles of
Scilly
Equity – Main Types
Individual or small group of individuals
Looking to invest money
May or may not want a Board seat
Want a good return from their investment
Angel Investment
Firm set up to invest equity into businesses
Can usually invest larger amounts of money
Will probably want a Board seat
Have resources to help growth
Private Equity/Venture Capital
Business wants some funding and possibly external help.
(Angel)
Business can’t deliver the plan without the funding and the external help (Private Equity)
When Should Equity be Considered?
Aroma Chemicals – High Growth
Angel invests £30k for 3% of business
Business initially valued at £1m
Angel takes Board seat (Chair)
Business grows and is sold for £20m four years later
Example: Angel Investment
Rainford Group plc – Acquisition & High Growth
Business raises £1m equity for 25% of company
Buys GEC division for £750k cash and £750k deferred
Grows combined business and sells five years later for £80m
Example: Private Equity
Strong management team
Credible high growth Business Plan
Potential to return 5-10 times initial investment
Exit strategy
EIS/SEIS approval (for Angel investment)
Good advisers (corporate finance, tax, legal)
What Investors Look For
Banks- Practical Tips on Approaching a Bank Manager
Dan Sampson Cert BB&CBusiness Manager
RBS (The Future Williams & Glyn)
Technology to help Banking
• Social Media• Website• Telephone• Letter• Walk into a Branch
Reasons to Approach a Bank Manager
• Start the Relationship• Obtain Advice• Borrow Money• Updates on trading• Introduce Friends and Relatives• Make a Complaint• End the Relationship
What is your purpose?
• Funding• Advice• A new relationship• Discuss the service you receive• Maintain your relationship• Add or remove parties to the account
Information you may need to provide.
• Identification• Address Verification• End of year accounts/tax returns• Security• Business plan/proposal• A contribution to the deal
Things to include in your business plan
• A C.V. of the people involved• The businesses products/services• USP (Unique Selling Point)• Competitor Analysis• Details of customers and market• SWOT Analysis• The proposal• Your contribution to the deal
SWOT Analysis- Pasty Shop
Strengths• Well known/liked product• Protected Status of product
Weaknesses• Increased VAT on items kept hot.
Opportunities• New flavours can be created
Threats• Competitor on next street
Summary of Tips
• Don’t be afraid to approach the Bank Manager
• Have an end goal in mind• Prepare questions you want to ask
Contact Details
Dan Sampson Cert BB&CBusiness Manager
RBS (The Future Williams & Glyn)Penhaligon House
Green StreetTruro
TR1 2LHTel: 01872 223681
Email: [email protected]
Contact DetailsGeo Fairweather Customer Advisor
RBS (The Future Williams & Glyn)Penhaligon House
Green StreetTruro
TR1 2LHTel: 01872 223344
Email: [email protected]
www.francisclark.co.uk
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