Home Sweet Home Working - Access to Finance


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  • Run through the timetable
  • fundamentally, a company exists as a pile of legal documents. a share certificate and the share register entry is really the only proof of a person’s ownership of a company’s equity.
    most company owners are understandably reluctant to sell any part of their shareholding because it will reduce their eventual capital return on their shareholding, and reduce their right to dividend income.
    many companies will prefer to fund growth through borrowings so that equity dilution can be avoided. however, in some circumstances it may be impossible to raise enough or indeed any debt, due to high risk levels as discussed earlier, for example where the company is early stage. in this case, equity will be the only option if the company needs funding to grow. the owners must therefore be prepared to suffer some dilution. the extent of dilution will depend on the funding required and the attractiveness of the business.
    sources - we won’t go into much detail on this – see seminar pack for more info
    vc - note that very few vcs now invest less than £2 million, however the regional funds including finance cornwall, finance south west and yfm south west ventures will invest £75k upwards (but ‘terminate’ on 31 december 2008)
    angels- dragon’s den is not a good example!
    mention swain
    how to find them - see pack
    other - but take care, and be aware of the fsma rules on financial promotion – criminal penalties

    outline the enterprise investment scheme (eis)
  • Leveraging - i.e. more equity enables more debt without increasing the gearing too much – a bank may often match equity investment £ for £
    Raising equity can take MUCH longer than debt
  • The ability of a company to plan out its strategy and to provide sound arguments for the probable success of its business will be a key factor in establishing credibility with bankers and investors. Above all, the business plan must demonstrate the viability of the business, and be realistic.

    Preparing a good plan can be time-consuming. Considerable care should go into its preparation. However, it is time worth spending, as a well-presented plan will immediately create the right impression.
    Inform them that there is a detailed template in the pack
    Max 20-25 pages plus appendices
    Think about the audience and what to give emphasis to - growth and exit OR predictable cash flows and stability
  • Home Sweet Home Working - Access to Finance

    1. 1. A2F Access to Finance Business Finance Options Mike Stutter Business Finance Adviser
    2. 2. A2F Agenda • Finance Options – Self, Bank, Others • Banks – O/D, Loans • Asset & Invoice Finance • Government & Regional finance schemes • Equity • Preparing for funding & business plans
    3. 3. A2F • Purpose • Overdrafts and Loans • Ability to repay (serviceability) • Security e.g. Freehold Property, Life Policies, Personal Guarantees • Stake • Track record • Skills Banks
    4. 4. A2F Working Capital/Cash Management • Debtors • Stock • Work in Progress • Creditors
    5. 5. Asset Based Finance • Vehicles • Equipment • Customers (Debtors) A2F
    6. 6. A2F Enterprise Finance Guarantee (EFG) – Replaces SFLGS – Accredited Lenders – Min £1K –Max. £1m – Currently 75% of debt guaranteed by Government – Premium of 2% is payable – New credit lines & refinancing of existing overdrafts permitted – Personal Security allowable – but unsupported
    7. 7. A2F Regional Schemes & Secondary Lenders • South West Loan Fund - Small Loan Scheme – max £50k - Max 5 years - Solvent growth businesses • Other Locally Based Regional Funders e.g Enterprise Development Funds
    8. 8. A2F Equity and where to find it • The nature of company ownership – Must be Limited Company • Sources – Venture Capital and private equity – Business Angels – SWAIN – Large accountancy practices – Beer & Associates – Friends, Family, Staff
    9. 9. A2F Equity – No interest cost – No security needed – No repayment of capital – Potential skills of investors, or strategic partner – Leverage for debt – Dilution of ownership – ‘Cost’ (high returns demanded) – Lead time to obtain it
    10. 10. A2F 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
    11. 11. A2F Questions ?