business finance options seminar - the choices simplified
Post on 22-Jan-2015
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- 1. Business FinanceOptions The Choices Simplified Business LinkA 2 F
2. Introduction Mike Stutter & Andy Weeks Business Finance Advisers A 2 F 3. Agenda
- Finance - what are the options?
- Expectations of funders
- Debt and Equity
- Government & Regional finance schemes
- Preparing for funding & business plans
- Additional support from Business Link
A 2 F 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
A 2 F 5. Types of Finance
- Bank Lending - Overdrafts & Loans
- Enterprise Finance Guarantee
- Asset Finance
- Factoring and Invoice Discounting
- Regional Funds & Secondary Lenders
A 2 F 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 A 2 F 7. Working Capital
- Debtors
- Stock
- Work in Progress
- Creditors
A 2 F 8. Ratios
- Stake
- Current Ratio (Assets V Liabilities)
- Net Worth (Solvency)
- Interest Cover (Serviceability)
A 2 F 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
A 2 F 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.
A 2 F 11. Factoring and Invoice Discounting -
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- Finance is tailored to working capital needs
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- Automatic support for growth
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- Security is the invoice raised
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- Leaves other business assets available as security
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- Care old perception of factoring is lending of last resort
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- Customer relationships may be damaged (factoring)
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- If sales reduce , the facility will reduce.
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A 2 F 12. Enterprise Finance Guarantee (EFG)
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- Replaces SFLGS
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- Accredited Lenders
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- Min 1K Max. 1m
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- Currently 75% of debt guaranteed by Government
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- Premium of 2%is payable
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- New credit lines & refinancing of existing overdrafts permitted
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- Personal Security allowable but unsupported
A 2 F 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
A 2 F 14. Grants
- R&D Grants
- Grant for Business Investment (GBI)
- Business Link Web Site-Grant search
A 2 F 15. Equity and where to find it
- The nature of company ownership
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- Must be Limited Company
- Sources
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- Venture Capital and private equity
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- Business Angels
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- SWAIN
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- Large accountancy practices
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- Beer & Associates
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- Friends, Family, Staff
A 2 F 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!
A 2 F 17. Expectations of funders - equity
- Equity investors
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- Exit strategy - Trade sale, Management Buy Out, or Flotation in 3+ years
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- Realistic Valuation
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- High Returns required
A 2 F 18. Equity
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- No interest cost
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- No security needed
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- No repayment of capital
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- Potential skills of investors, or strategic partner
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- Leverage for debt
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- Dilution of ownership
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- Cost (high returns demanded)
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- Lead time to obtain it
A 2 F 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
A 2 F 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
A 2 F 21.
- 1:1 finance advice (telephone/clinic/site visit)
- Information website & call centre 0845 600 9966
- Local Business Link adviser
- Specialist advice IT, Marketing, Innovation, Environmental, Skills
- Grant potential LMAS, IYRE
Further support from Business Link A 2 F 22. Questions ?A 2 F
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