How to apply for loan funding (bank and non-bank)

1 July 2014

FiC2014 follow up briefings. No 1

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House keeping

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Contents: Presenters and format

• Presentations (8.15am to 9am)

• Intro: Richard Wadman (5)

• Bank: Bruce Pedrick (12.5) (Lloyds)

• Non-bank: John Peters (12.5) (SWIG)

• Business Plan and “Alternative Finance”: Richard Wadman (7.5)

• SME: Ben Treleaven (7.5) (ISO Spaces)

• Questions/discussion over breakfast (9am to 10am?)

1. What they look for

2. Key documents: specific comments

3. Why applications succeed or fail?

4. Advice/ “Tips”

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Investment ready: preparation

Understand your

requirements (A)

Understand funding options

available (B) and funders

requirements (C)

Type of funds

required

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Your requirements (A)

Cash: amount and term?

Other e.g., expertise or contacts?

Business Finance Guide:

• Step out from your business

• Take a fresh look at prospects and challenges

• Analyse your opportunities

• Reach for the future (projections)

• Think about finance

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Funding options (B)FiC 2014 and Finance in Cornwall factsheet: Grant, Debt and Equity

And many more…

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Know your options (C – part)

The Business Finance Guide

• Overview: through company lifecycle

• Equity

• Debt

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The banks…

• “Bank of England data showed that lending to companies of all sizes fell in the three months to February on a year earlier despite calls by chancellor George Osborne for businesses to boost growth by investing more.” (Guardian – 22 April 2014)

• “the finance gap could be between c£84bn and c£191bn over the next five years” (Boosting Finance Options for Business, March 2012).

Bank of England: trends in lending April 2014

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The banks

Banks… still the major source of funds to SMEsDuring the 1st Quarter 2014:

• The banks approved £5.5bn of new loan facilities and £1.3bn of new overdraft facilities. Of this, £2.6bn of new loan and overdraft facilities were for smaller businesses and £4.2bn were for medium businesses, an increase of 10% compared with Q1 2013.

• March 2014 also saw the highest monthly level of approved borrowing since November 2011.

https://www.bba.org.uk/wp-content/uploads/2014/05/BBA01-431558-v1-Bank_Support_For_SME_s_-_Q1_2014.pdf

Approval rates were:

• Smaller businesses – Loans 79%, Overdrafts 77%.

• Medium businesses – Loans 91%, Overdrafts 93%.

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Banks: Government initiatives

• Enterprise Finance Guarantee Scheme

Underwriting part of bank lending to SME

• Project Merlin: targets for Banks to lend

Under Target for lending to small business by > £1bn

• National Loan Guarantee Scheme:

Government guarantees used to reduce interest rates (to bank which they pass onto business)

• Funding for Lending

Banks borrow from Bank of England at reduced interest rates if lend onto SMEs

• Assisted Asset Purchase

RGF funding used to increase deposit on HP or Loan

Preparing for a Bank Lending Request

Bruce Pedrick,

Relationship Director, Cornwall

  Customers Facilities Deposits Colleagues

Devon & Cornwall

16,800 £1.75bn £1.40bn 180

SUPPORTING BUSINESS IN CORNWALL AND DEVON

• Lloyds net lending rose 8% during 2013.

• 560 businesses joined us from competitors during 2013.

• Our teams are closely involved with other avenues to funding and key professional advisors

• Local Lending Decision Making to minimum £500K (often £1M)

C - CharacterC - CapabilityC - CapitalP - PurposeA - AmountR - RepaymentT - TermS - Security

Basics of Lending

Why does you business exist (Your Purpose/Mission Statement)

Where do you want to take it (Your Objectives)

How will it get there (Your Strategy)

What will it cost (Your Budget)

Include reference to:

Staff/People

Competition

Customers/Suppliers

Marketing/Profile/Advisors

Premises

Sector specific market conditions/trends

Equipment required

USP – what makes me/us different

SWOT Analysis – Strengths, Weaknesses, Opportunities & Threats

Key Documents – Business Plan

Last 3 years Annual Accounts

Most up to date Management Accounts

Projected Cash Flow

Projected Profit & Loss

Projected Balance Sheet

Specialist eg Rent Roll for Property Investors

Rationale to support forecasts eg how you will increase the Gross Profit Margin

Personal ALIE (Assets/Liabilities/Income/Expenditure)

Key Documents - Financials

Fail to prepare, prepare to fail!?

Local Lending Discretion up to min £500K (£1M in many cases)

Approx 80% of Applications get Agreed and the remainder generally are require more Information or restructuring

Robust Appeals process

Why Applications Fail

Prepare

Know Your Business

Speak to your advisors and the bank beforehand

Advice

For further information:

lloydsbankbusiness.com

SWIG Finance

South West Investment Group

www.swigfinance.co.uk

01872 223883info@swigfinance.co.uk

What is SWIG?

…a CDFI

Community Development Finance Institutions (CDFIs) lend money to businesses, social enterprises and individuals who struggle to get finance from high street banks and loan companies. They offer loans and support at an affordable rate to people who cannot access credit elsewhere

‘‘

www.swigfinance.co.uk

01872 223883info@swigfinance.co.uk

Operating across the South West

£17 million to over 1,500 businesses since 1996

• National Start Up Loans programme• Start ups or trading less than 18 months• Loans up to £9,900 • Larger amounts in exceptional cases• Fully funded business support

www.swigstartups.co.uk01872 227933

STARTING A BUSINESS?

LOOKING TO GROW?

SWIG Business Growth Loans

• Viable Growth and Start Up Businesses• Unable to secure traditional finance • Commercial rates of interest• Up to £100,000

How to Apply

• Complete online form at www.swigfinance.co.uk

• We shall respond in 48 hours• If all OK, proceed to full application• Complete form and submit business plan • Assessment, interview and decision in c.2

weeks

3 Golden Rules

1.Keep it simple (we’re more interested in your customers than technical specifications)

2.Be transparent (but your best face on, not a mask – we need to understand your background)

3.Know your numbers (and please explain them!)

Business SupportWe are linked into a wide variety of business

support agencies and other sources of finance

Your Business Business support Business Growth

+ =

Get in touch

www.swigfinance.co.ukinfo@swigfinance.co.uk

01872 223883

SWIG Services LtdLowena House, Glenthorne Court, Truro Business ParkThreemilestone, Truro, Cornwall, TR4 9NY

Business Plans, Financial Projections(And a little bit on “alternative sources of finance”)

Richard Wadman – Corporate Finance Director

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“Business Plan”

• Business case

• Tailor to audience

• Informing v giving away IP

• “Compelling narrative”

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Structure of a business plan

• Front cover

• Contents

• Executive summary

• Background to the business

• Products and services

• Customers and markets

• Business operation

• Management

• Financial history

• Financial projections

• Appendices

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Projections: the perfect scenario

• Monthly integrated profit and loss, cashflow and balance sheet covering a period of three years

• Documented assumptions

• Ability to sensitize the model

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Projections: the real world!

• Choose an approach that works for the business

• Focus on the KPIs of the business

• Make basic assumptions

• Compare to actual results

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Common issues

• Inconsistencies between Business Plan (narrative) and Projections (figures)

• Profit ≠ cash

• Do not forget about tax (VAT and tax on profits)

• Match funding to cash requirements, business model & exit strategy

• Read through documents ‘cold’

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Alternatives…

• Grants, debt and equity (3%)

• Asset backed lending

• “The crowd” - Rewards, Debt and Equity

• http://www.brewdog.com/equityforpunks

• Supply Chain

• High Net Worth Individuals – EIS/ SEIS and Angel Co Fund

• “Access to finance” part of Small Business, Enterprise and Employment Bill

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British Business Bank

• £300m investment programme launched in April 2013 (part of £1bn allocated in 2012 Autumn Statement)

• The first £45m of Business Bank funds will be put into SME specialist

lenders Praesidian Capital Europe (£30m) and BMS Finance (£15m), helping them offer a total of approximately £125m in new lending” (6 November 2013)

• The British Business Bank programme confirmed today that it is making

a new £40m to support further lending to smaller businesses through peer-to-peer lender Funding Circle (25 February 2014).

• The British Business Bank has today published new guidelines for its Enterprise Capital Funds

(‘ECF’) programme that include a doubling of the maximum potential commitment it can make to new ECFs to £50m (28 April 2014).

• Business Bank currently run directly by BIS (until?)• http://british-business-bank.co.uk/

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SME perspective

Ben Treleaven – ISO Spaces

“…Truro SME unlock £100k to lead extra-space race”

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Discussion over breakfast…

Now…

But first…

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Actions/ follow up: assistance• Presenters• Oxford Innovation, Get Set for

Growth, Growth Accelerator, Growth Vouchers

Developments• http://www.francisclark.co.uk/news-views/blog/

Topics for future breakfasts?• International Trade• The share• An entertaining discussion of “basic

tax”• Protecting the family business• Equity for SMEs• Crowdfunding

Future…

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