Financing Your Business In A Tough World


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Presentation by the Founder and Chairman of the Corporate Finance Network (GB) LLP discussing alternative financing for your business.

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Financing Your Business In A Tough World

  1. 1. Financing your business in a tough world<br />Alternatives to the traditional <br />options on the high street<br />Autumn 2009<br />
  2. 2. Traditional routes<br />Overdrafts<br />Loans<br />Asset based lending (HP, factoring)<br />Generally provided by high street banks<br />“Big 4” = 70% + of market in 2007 (Source: Business Banking survey 2007)<br />
  3. 3. The High Street banks today?<br />
  4. 4. Banking options<br />Enterprise Finance Guarantee Scheme<br />Replaced SFLGS, similar guarantee for bank (75%)<br />Wider availability to more businesses but still some restrictions (eg insurance, education) – check<br />Still bank’s decision<br />Extra premium payable<br />Plus some banks now have:<br />new mandates to lend<br />change pricing <br />or convert debt to equity (Capital for Enterprise Fund)<br />
  5. 5. What are the alternatives?<br /><ul><li>Our Top 10 ideas for innovative sources of finance
  6. 6. Various sectors - hopefully at least one which will suit you
  7. 7. Plan ahead – it takes time to arrange finance. Don’t wait until...</li></li></ul><li>Planning<br />How much do you need & when by?<br />Don’t leave it until you’re in your weakest position & be sure you won’t damage your current facilities<br />Have an excellent business plan – both the ‘story’ & the ‘numbers’<br />
  8. 8. Warnings!<br /><ul><li>Contacts, contacts, contacts
  9. 9. Personal recommendation is best
  10. 10. Each business’s circumstances are different & these options may not be appropriate for all businesses – please talk to us afterwards for more information & to review your situation in more detail</li></li></ul><li>1a & 1b<br /><ul><li>For all businesses
  11. 11. The fundamentals
  12. 12. Reduce your costs, especially:
  13. 13. Utilities
  14. 14. Purchase ledger costs
  15. 15. Use a procurement expert on a 50:50 savings share or put your requirements ‘out to tender’</li></li></ul><li>1a & 1b<br /><ul><li>Working capital systems
  16. 16. Debtors
  17. 17. Creditors
  18. 18. Stock
  19. 19. Cash
  20. 20. Credit control
  21. 21. the best it can be?
  22. 22. do you offer discounts & do they really work?
  23. 23. Paying suppliers
  24. 24. On 30 days?
  25. 25. Extend credit terms</li></li></ul><li>1a & 1b<br />Stock control<br />Get better ‘just in time’ relationships with your suppliers<br />Petty cash & employee expenses<br />Use company credit cards<br />Get hotel trade accounts & fuel accounts?<br />
  26. 26. Number 2<br /><ul><li>Do you sell/distribute commodity goods to businesses?
  27. 27. Sales aid finance gives you the ability to offer your customer a 3rd party finance facility to pay for their goods over an extended period of time
  28. 28. Also known as supplier finance or point of sale finance
  29. 29. Watch that you aren’t tied into the facility or have to cover any defaults; you don’t want a tri-part agreement</li></li></ul><li>Number 3<br /><ul><li>Independent asset based lenders offer
  30. 30. Factoring/invoice discounting
  31. 31. Plus ‘cashflow’ loans
  32. 32. Or EFGS
  33. 33. Spread your lenders & get a better service
  34. 34. Watch the terms will suit your business – eg concentration clauses & credit insurance</li></li></ul><li>Number 4<br /><ul><li>Do you sell goods online via Worldpay, Protx or similar?
  35. 35. Do you have to wait 30 days until you are paid?
  36. 36. Merchant finance will provide upfront cash against that balance you are due</li></li></ul><li>Number 5<br /><ul><li>Do you hold stock of finished goods that have a wide resale market? (usually consumer goods)
  37. 37. Stock finance will advance you a facility against the value of that stock
  38. 38. But – only applicable to those businesses who have excellent continuous stock control systems & many resale options</li></li></ul><li>Number 6<br />Financing your payroll<br />56 days advance <br />Doesn’t affect your existing facilities<br />
  39. 39. Number 7<br /><ul><li>Do you have any properties with substantial equity?
  40. 40. Bridging finance is a short-term facility which can be arranged speedily
  41. 41. But quite expensive c.2% per month, hence short-term</li></li></ul><li>Number 8<br />Have you developed a new technology?<br />Could be licensed if it is patented & can earn you income from royalties<br />Skills are in pitching the idea to the right person in the organisation – not ‘techies’<br />
  42. 42. Number 9<br />Corporate Venturing Scheme is used by certain large corporates to gain tax reliefs<br />Invest/JV with a small business<br />Both gain something from the arrangement eg access to specialist skills or resources<br />
  43. 43. Number 10<br /><ul><li>Buying a business?
  44. 44. Negotiate the deal for deferred consideration – you don’t pay for all the business on ‘day 1’
  45. 45. Many SME disposals are structured this way & this will increase as business sales get more difficult</li></li></ul><li>Conclusion<br />There are many alternatives & others not even mentioned here (eg grants, equity finance)<br />We have the contacts & the skills<br />Plan ahead & talk to us soon<br />
  46. 46. Contact details<br />Kirsty McGregor, Chairman, <br />The Corporate Finance Network<br />For your local firm, visit<br />