Accelerate 2014 - Sheffield (www.acceleratesheffield.co.uk) Delving into the world of credit finance for social businesses.

1. The Market for Credit Finance

2. Viabilty Test
• Key distinction between viable and unviable
businesses
• Unviable businesses – lender unlikely to lend at any
level
• Viable businesses – e.g. a lender may be unable to
lend the full amount due to:
– Lack of security
– Lending Criteria / Policy
– Account operation
– Current trading
– Poor credit rating
– Uncomfortable lending 100%
• Bank may take comfort from additional funding for
headroom / contingency

3. Funding Risk and Return Matrix
Return
High Return/High Return
Low Risk/Low Return
Low Return/High Risk
Low Risk/High Return
High
Low
Risk
Low High

4. The Funding Life Cycle

5. Sources of Finance
• Own Funds - First option, prove idea
• Family and Friends - They know you so may support and help
• Government Grants – If available, mostly Research &
Development based
• Banks - Generally like security and a track record, not much risk
taken
• Invoice / Asset Finance Providers - Will require business assets
as security
• Investment Funds - Gap funders, may take more risk.
• Private Equity Firms - Generally larger investments, they want
good returns
• Business Angels - Private individuals who have spare cash to
invest
• Crowd Funding – Crowd Cube, Funding Circle and Market Invoice
• In reality it is often a package of funding.

6. How do Lenders look at Risk?
“The business is viable and can demonstrate ability to repay”
• The Management and people involved
• Historic performance - the trends are important
• Assumptions behind the forecasts – provide details of market
assessment & sales growth
• Funding requirement and purpose - appropriate package is key
• Debt serviceability - the ability to repay
• Key business risks – what may affect the ability to repay: e.g. what
will affect income & how well can costs be controlled
• Is the Bank/Funder willing to recommend and / or support the
business

7. The Challenge
"The majority [of investment opportunities] were declined on the basis
of a suspect business plan or business model … The most common
characteristic was the inability of the applicant to demonstrate a
credible revenue model. They could not show that the company
could attract sufficient paying customers to cover the costs of the
business. Behind this generalisation are a range of problems. The
inability to demonstrate any unique selling point - why would anyone
purchase your product? The inability to demonstrate a route to
market - how are you going to get your product to a customer? The
inability to demonstrate that there were sufficient potential
customers to warrant the new business. Very often the plans
concentrated on the product or technology developed by the
applicant, but little or no consideration had been given to the costs
of marketing, distribution or customer servicing" (cited in Mason and
Harrison, 2004).

8. And finally...
Planning is important
but you need to do
what you said you
were going to do!