Sources of Finance


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Sources of Finance

  1. 1. Sources of Finance for Creative Businesses Jason Ball Investment Executive - London Seed Capital 31 st March 2006
  2. 2. SOURCES OF FUNDING COVERED <ul><li>Grants </li></ul><ul><li>SFLGS </li></ul><ul><li>Asset Finance </li></ul><ul><li>Local Enterprise Support </li></ul><ul><li>Regionally Focused VCs </li></ul><ul><li>Young Entrepreneurs </li></ul><ul><li>Seed Technology and Arts </li></ul><ul><li>Business Angels </li></ul><ul><li>Other Specialist VCs </li></ul>
  3. 3. GRANTS <ul><li>London Innovation – part of the London Development Agency </li></ul><ul><ul><li>Lists a number of grant funding sources available in London </li></ul></ul><ul><li>DTI R&D Grant – Four levels, from… </li></ul><ul><ul><li>Micro projects, grant of up to £20k… </li></ul></ul><ul><ul><li>… to Exceptional projects (involving high-cost technology development, larger firms), = up to £500k </li></ul></ul><ul><li>EU various grants and loans </li></ul><ul><li>Further Info: </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> / </li></ul><ul><li> </li></ul>
  4. 4. SFLGS <ul><li>Start-up businesses often have few assets to use as collateral – so hard to obtain loans </li></ul><ul><ul><li>Under SFLGS the Government guarantees the loan </li></ul></ul><ul><li>21 lenders including all high street banks </li></ul><ul><li>75% guarantee, no personal </li></ul><ul><li>Guarantee loans of up to £250,000 </li></ul><ul><li>Term up to 10 years </li></ul><ul><li>Availability to qualifying businesses with turnover up to £5.6m and age up to 5 years old </li></ul><ul><li>Further info: </li></ul>
  5. 5. ASSET FINANCING <ul><li>Outstanding invoices often an SME’s biggest asset . </li></ul><ul><li>Factor controls SME’s sales ledger, providing credit collection and control. Pays 80-90% of invoice within 24hrs </li></ul><ul><li>Invoices are sent to and assigned to the factor </li></ul><ul><li>Factor pays the balance (less charges) when the invoice has been paid </li></ul>Two ways to exploit COMMERCIAL invoices: (1) Factoring and (2) Invoice Discounting (1) Factoring: suited to smaller firms (below £1m turnover).
  6. 6. ASSET FINANCING (2) Invoice discounting: suited to larger firms <ul><li>Same as Factoring, with two important differences : </li></ul><ul><ul><li>Collection responsibility remains with the SME </li></ul></ul><ul><ul><li>Invoices remain assigned to the SME, not the invoice discounter </li></ul></ul>Both facilities involve two costs: Service charge (% sales) AND Interest Charge Further info: All major high street banks Independent Growth Finance:
  7. 7. LOCAL ENTERPRISE SUPPORT <ul><li>Numerous organisations offer support, including </li></ul><ul><ul><li>HBV Enterprise </li></ul></ul><ul><ul><li>Kingston Innovation Centre </li></ul></ul><ul><ul><li>Business Link 4 London </li></ul></ul><ul><ul><li>Portobello Business Centre </li></ul></ul><ul><ul><li>one London </li></ul></ul><ul><li>Further info: </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul>
  8. 8. LOAN FUNDS <ul><li>OneLondon £7m Loan Fund available: </li></ul><ul><ul><li>Seed (e.g. £5k) </li></ul></ul><ul><ul><li>Growth (e.g. £20k) </li></ul></ul><ul><li>Eligibility: </li></ul><ul><ul><li>“ Objective 2” areas (East/North-East areas; post-code specific), oneLondon and ELSBC, up to £250k </li></ul></ul><ul><ul><li>All other areas up to £20k standard </li></ul></ul><ul><li>Advice and mentoring support post-loan </li></ul><ul><li>Further info: </li></ul><ul><li> </li></ul>
  9. 9. SEED TECHNOLOGY and ARTS <ul><li>University Seed Funds – invest in university spin-out companies </li></ul><ul><li>The Recycling Fund – recycling companies with a UK focus </li></ul><ul><li>Film London – Film finance </li></ul><ul><li>NESTA – innovation, most projects £35-£80k </li></ul><ul><li>The Wellcome Trust – (‘Translation Awards’), healthcare sector </li></ul><ul><li>Further info: </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul>
  10. 10. YOUNG ENTREPRENEURS <ul><li>Shell LiveWIRE - £10,000 prize 16-30yrs </li></ul><ul><li>Prince’s Trust: </li></ul><ul><ul><li>a low interest loan (up to £4,000 for a sole trader, or up to £5,000 for a partnership) </li></ul></ul><ul><ul><li>a grant of up to £1,500 in special circumstances </li></ul></ul><ul><ul><li>a test marketing grant of up to £250 </li></ul></ul><ul><li>Further info: </li></ul><ul><li> </li></ul><ul><li> </li></ul>
  11. 11. EQUITY FINANCE <ul><li>Selling a share in your business </li></ul><ul><li>Various sources of equity finance: </li></ul><ul><ul><li>Friends and Family </li></ul></ul><ul><ul><li>Business Angels’ (private investors) </li></ul></ul><ul><ul><li>Venture Capital </li></ul></ul><ul><li>How do these link together? </li></ul>
  12. 12. EQUITY FINANCE DIAGRAM CAPITAL NEEDS TIME Seed Start-up Early Growth Sustained Growth High Risk Low Risk Friends, Family & Fools Business Angels Formal Venture Capital IPO Growth
  13. 13. BUSINESS ANGELS <ul><li>High Capital Returns for risks involved </li></ul><ul><li>SMEs with a clear/concise Business Plan </li></ul><ul><li>Minority shareholder legal protection </li></ul><ul><li>Potential for explosive growth </li></ul><ul><li>Involvement post investment </li></ul><ul><li>Exit in medium term </li></ul>Business Angel = private investor who might invest their own money in your business. Angel Network = organisation that links suitable businesses to its membership of Angel investors
  14. 14. BUSINESS ANGELS <ul><li>BBAA – angel network trade association </li></ul><ul><li>Example Business Angel Network: </li></ul><ul><ul><li>London Business Angels. Not-for-profit, 180 investors meet 7 times p/a, invests £100k - £750k , 33% success rate. 800 applicants p/a and 40 selected. </li></ul></ul><ul><ul><li>‘ Co-investment funds’ invest alongside angels </li></ul></ul><ul><li>Further info: </li></ul><ul><li> </li></ul><ul><li> </li></ul>
  15. 15. INVESTMENT FUNDS <ul><li>The Capital Fund: up to £250k, further £250k possible after 6 months – Greater London only </li></ul><ul><li>Bridges Community Ventures: £150k+ in companies based in deprived areas </li></ul><ul><li>London Seed Capital: £50k to £100k business angel co-investment fund – London and South East </li></ul><ul><li>GoEast Ventures: £50k to £350k East London </li></ul><ul><li>Creative Capital Fund: £75k co-investment, up to £500k available as follow-on funding </li></ul><ul><li>Further info: </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul>
  16. 16. VENTURE CAPITALISTS <ul><li>Larger amounts of funding: £1m+ </li></ul><ul><ul><li>Equity investors who seek a seat on the Board </li></ul></ul><ul><li>Typically invest in later stage companies </li></ul><ul><li>Represented by British Venture Capital Organisation (BVCA) </li></ul><ul><ul><li>Members invest in all sectors of the economy </li></ul></ul><ul><ul><li>170 full members </li></ul></ul><ul><li>Further info: </li></ul><ul><li> </li></ul>
  17. 17. Jason Ball Thank you for your interest Tel: 0044 207 089 2309 [email_address]