Finance in Cornwall 2014 Segment 2 'Developed Business'

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Slides from Segment 2 'Developed Business' of Francis Clark's Finance in Cornwall 2014 seminar held on 13th May in Newquay.

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Finance in Cornwall 2014 Segment 2 'Developed Business'

  1. 1. Scott Bentley - Partner Funding and Support for SMEs “Developed businesses”
  2. 2. www.francisclark.co.uk Structure of morning • Background and Grants intro (8.30am to 9.35am) • SME, LEP, Cornwall EU millions and the ‘funding gap’ • Grant schemes (Overview) • Video from Matthew Hancock (Minister for Skills and Enterprise) • Grants, debt, equity and business support – stratified by size*(9.55 am to 11.00 am) • Banks, alternative sources of finance and business support (11.20 am to 12.25pm) • Q&A one to one / Networking (12.25pm to 1.45pm)
  3. 3. www.francisclark.co.uk Funding and Support for SMEs (>£100k) • 6 to 8 minute presentations on: • Assisted Asset Purchase (grant) • SW Loan Fund (debt) • Santander (debt/ mezzanine) • Business Growth Fund (equity) • Westbridge Capital (equity) • Folk 2 Folk (Peer to Peer) • Various • Case Study • Q&A
  4. 4. Regional Growth Fund/Assisted Asset Purchase Bruce Pedrick Relationship Director
  5. 5. Regional Growth Fund/Assisted Asset Purchase Overview Benefits for Business Key Features Eligibility Exclusions Examples Summary and next steps 5
  6. 6. Regional Growth Fund/Assisted Asset Purchase  Assisted Asset Purchase is part of the larger £2.6B Regional Growth Fund  Lloyds Bank has initially been allocated £25M (to be drawn by April 15)  Non repayable grants – subject to eligibility criteria and agreed job targets  Create long term growth and sustainable employment  Encourage private sector investment  Simple application process 6 Overview
  7. 7. Regional Growth Fund/Assisted Asset Purchase Benefits To Business • Enables an asset purchase (where businesses currently lack deposit) • Grants from £5,000 up to £500,000 • Up to 20% of the asset cost for small enterprises (up to 50 FTE and less than 10M Euro T/O) • Up to 10% of the asset cost for medium enterprises (up to 250 FTE and less than 50M Euro T/O) • Amount of grant will be minimum amount required to enable us to lend on normal lending terms eg stand alone loan required towards premises purchase where bank may traditionally lend 70% loan to value but purchaser has only 15% deposit, therefore max. grant 15% • Remaining funding via HP / Loan (Min £100,000) facility
  8. 8. Regional Growth Fund/Assisted Asset Purchase Key Features • Create / protect 1 job for every £15,000 grant received • Independent accountant to verify within 30 months after drawdown or 6 months after job target achieved • Grant is taxable income and classed as state aid • Unable to link in any other forms of state aid. • Remaining loan/HP requirement must meet normal lending criteria • Asset must be located in England (in an area outside London)
  9. 9. Regional Growth Fund/Assisted Asset Purchase Eligibility • You need finance but lack the sufficient deposit • Able to commit to creating / protecting jobs for a min 12 month period • An SME (as defined earlier) • No other state aid supporting purchase • Business not in financial difficulty and new loan/HP requirements meets usual bank lending criteria
  10. 10. Regional Growth Fund/Assisted Asset Purchase Exclusions • Property investment / development – property purchases are eligible if property is for own use and held on Co Bal Sheet • Air transport equipment • Road freight transport for hire or reward – eligible if eg vehicle for a wholesaler who does their own deliveries • Fishery & Aquaculture • Primary production of Agriculture products • Coal • Export Related Activities – case by case
  11. 11. Regional Growth Fund/Assisted Asset Purchase  Retailer – £195K RGF and £600K loan towards purchase of additional retail premises for expansion – KIV property must be for own use and held on Co Bal Sheet  Building Contractors - £145K RGF grant and £600K loan towards purchase of new offices  Tourism - £95K RGF grant and £380K loan towards assets to be used in refurb of bar/restaurant/catering area and a small renewable energy scheme  Restaurant - £150K RGF grant and £450K loan to purchase their freehold premises  Manufacturing - £110K RGF grant plus loan of £385k to acquire a new R&D factory/ warehouse towards purchase price of £590K 11 Recent Examples
  12. 12. Regional Growth Fund/Assisted Asset Purchase Summary and next steps • Support SMEs with asset purchases that may have been discounted • Bring forward growth plans and create/protect jobs • Speak to Francis Clark or your Relationship Manager/Director
  13. 13. Mike Wall
  14. 14. The South West Loans Fund Finance for growing SMEs in Cornwall £50,000 to £250,000
  15. 15. The South West Loans Fund FC Fund Managers has been responsible for investing and managing the larger loan element of this £12m Fund into Cornwall and South West England • finance allocated to the rest of the South West has already been invested • there is SOME availability left in Cornwall • loans from the Fund fit a growth businesses which cannot source all (or any) of its finance requirements from traditional sources • loans for most legitimate purposes can be considered • repayment terms up to 5 years; fixed interest rate; early redemption without penalty • Application is through a secure portal at www.fcfundmanagers.com • The team can also be reached at 01872 272288
  16. 16. The South West Loans Fund However there is very little left in the pot, so if you are a company which is: • ambitious • wanting to grow your sales, profit and jobs • located in Cornwall (or about to be) • constrained from achieving your goals through limited finance • and you have a great business! Make contact now, or very soon - don’t leave it on the back burner…
  17. 17. Private Equity or Loan Investments
  18. 18. Private Investments FC Fund Managers may also be interested in private equity or loan investment opportunities in its own right • not subject to European or UK “fund eligibility” rules • is there an opportunity to make money? • turnaround or distressed situations can be considered • short or medium term investments can be considered • do you have a lucrative project but are held back from making it happen by a lack of finance and/or connectivity? • If so pick up the phone to 01872 272288 or message through the website www.fcfundmanagers.com
  19. 19. SANTANDER GROWTH CAPITAL Paul Chadney
  20. 20. GROWTH CAPITAL FILLS THE FUNDING GAP as identified in the Rowland Report
  21. 21. OUR BROAD CRITERIA – WHAT ARE WE LOOKING FOR? Annual turnover £0.5m – £25m Demonstrable Growth in a combination of sales and / or profits Track record of operating profitability and cash generation Proven management teams with ambition Privately owned businesses rather than Private Equity backed Not start-ups. At least 3 years of financial history
  22. 22. AREAS WHERE GROWTH CAPITAL SUITABLE Capex investment to support growth plans Investment in New Product Development Investment in sales & marketing overhead for new products / areas Acquisition funding support Funding of proven roll- out concept Expansion projects to drive rapid growth
  23. 23. OUR GROWTH CAPITAL PROVIDES KEY BENEFITS TO SMEs Debt offering - No warrants and no dilution of equity Preserves cash - Interest only. Cash interest is L+5%. Rolled interest of 5% Enhanced debt capacity - Cash flow lend not limited to tangible security No prepayment penalty fees - Provides flexibility on term Full banking and security - No automatic requirement for PGs Access to Breakthrough programme - Additional support
  24. 24. BREAKTHROUGH PROGRAMME – NOT JUST FUNDING The Breakthrough programme will invest £200 million in fast-growth SMEs, supporting local enterprise and community initiatives, creating jobs, inspiring entrepreneurs of the future and turbo-boosting a private sector led economy This initiative will help SMEs participating in the Breakthrough programme to reach new overseas markets if their growth plans and ambitions are beyond the UK. It includes subsidised trade missions, educational roadshows and support accessing information on exporting. Santander is running a unique experience programme for fast-growth SMEs that takes them behind the doors of the world’s most iconic and best fast-growth businesses, to learn first hand how they did it – real experience to help their own growth journey. In keeping with our focus on responsible business, Santander has launched a number of initiatives to encourage more responsible and inclusive business practice and to invest in Social Enterprise development. Santander is running regional Breakthrough Live conferences for fast-growth SMEs. Working with Santander Universities the Breakthrough Live conferences bring together leading entrepreneurs to share experiences. Santander has launched an online portal for SMEs participating in the Breakthrough investment programme to access the best student and graduate talent across our partner University network – including Universities in Scotland. Santander has up to £200 million to invest in fast-growth SMEs turning over between £500k – £25m across the UK. The investment programme will run over the next 3 – 5 years and invest in up to 200 SMEs. 1. Breakthrough Growth Capital 4. Breakthrough Talent 2. Breakthrough Live 5. Breakthrough Responsibly 3. Breakthrough Masterclasses 6. Breakthrough International www.santanderbreakthrough.co.uk
  25. 25.  Communications Technology  Completed July 2012  £1m Growth capital loan  10 new jobs  Vet Practices  Completed July 2012  £1.25m Growth capital loan  120 new jobs  Engineering  Completed September 2012  £0.4m Growth capital loan  20 new jobs  Legal Services  Completed January 2013  £1.1m Growth capital  20 new jobs  Software  Completed January 2013  £0.5m Growth capital loan  6 new jobs  Healthy Fast Food chain  Completed March 2013  £1.25m Growth capital loan  150 new jobs  Telecommunications  Completed March 2013  £1m Growth capital loan  50 new jobs  Software  Completed March 2013  £0.5m Growth capital loan  14 new jobs  Software as a service (SaaS)  Completed April 2013  £0.5m Growth capital loan  14 new jobs  Thai restaurant chain  Completed September 2012  £2.4m Growth capital loan  90 new jobs  Healthy Fast Food chain  Completed May 2013  £0.7m Growth capital loan  50 new jobs  Media services provider  Completed April 2013  £0.7m Growth capital loan  15 new jobs  Cleaning products  Completed September 2012  £0.85m Growth capital loan  5 new jobs  Women’s clothing e-tailer  Completed September 2013  £0.7m Growth Capital loan  30 new jobs SOME OF OUR GROWTH CAPITAL INVESTMENTS
  26. 26. THANKYOU ……a bank for your ideas!
  27. 27. Growth Capital Investors Introduction to BGF. Ned Dorbin, Investment Director 13 May 2014
  28. 28. Growth Capital Investors Who we are.BGFisaninvestmentfirm thatprovidesgrowthcapital of £2m - £10m toUK businesseswithturnoverof £5m - £100m. Funding for growth and equity release Acquisitions, working capital, R&D, capital investment, overseas expansion, balance sheet etc Investment of £2m – £10m for a minority stake Long-term and patient capital, no forced exit Access to huge network and support Fast and focused investment process
  29. 29. Growth Capital Investors Selectionof our investmentsso far – portfolioof 53 companies….andgrowing!
  30. 30. Growth Capital Investors Investment of £2m-£10m Cash-in: to support long term growth Cash-out: for existing shareholders Equity stake of up to 40% Always a minority partner – you retain control Flexible structures – equity / loan notes Meets the needs of the company and shareholder No closed fund pressures Patient capital. No drag rights, no forced exit Fair legal approach Less onerous investor legal protections Fast and focused investment process Minimises disruption and fees More than money Access to impressive network and support What we can offer. Workingalongsidethe banks,BGFprovides growthcapitalina waythat meetscompanies’needs.
  31. 31. Growth Capital Investors South West and South Wales James Austin Investment Director 07872 819093 Ned Dorbin Investment Director 07800 682195 Alex Garfitt Investment Manager 07770 582021 Paul Oldham Regional Director 07887 657697 Edwin Davies Investment Manager 07880 384983 Greg Norman Investment Manager 07557 747302
  32. 32. WestBridge Capital Private Equity British Private Equity Awards Small Buyout House of the year nominee 2012 Guy Davies
  33. 33. Who is here today British Private Equity Awards Small Buyout House of the year nominee 2012
  34. 34. Agenda 1.Who we are 2.What we do 3.Example : Aero Stanrew 4.WestBridge 100 club 5.Summary
  35. 35. Who we are • Private equity investor with offices in the South West and South East • Have completed 3 out of our four most recent deals in the South West – Two more at an advanced stage • Our money comes from pension funds, institutional investors and the WestBridge 100 club • We own our business and invest significant amounts of our money in the businesses we support • We have a top track record
  36. 36. What we do • Partner with management teams to acquired businesses worth between £5m and £15m • Support these management teams with our experience to grow our company’s so the are worth between £15m to £50m • Provide development capital along the way if needed • Seek an exit at a mutually acceptable time to release value for all shareholders
  37. 37. Example: Aero Stanrew Aerospace and Defence business of the year South West business of the year
  38. 38. Example: Aero Stanrew • Supported management buy-out in January 2012 • Target £50 million value in 5 years • Leader in its tightly defined niche • Exceptional management team 39 2011 20162012 2013 2014 2015 £8.5m £30m to £35m Target £50m Values
  39. 39. WestBridge 100 club • Successful businessmen who want to invest in businesses that meet the WestBridge quality threshold and have undergone rigorous due diligence • We work with these individuals to provide new business leads and introductions to accelerate growth of investee companies • Investors can earn • An attractive interest rate on c 90% of their investment • A tax free capital gain (EIS) • Target 3x money multiple.
  40. 40. Summary • Private equity can be used to develop growing companies • Suitable for established profitable companies • Usually a change of ownership involved • Private equity can add value • Experience to support teams meet growth challenges • Additional funds • Business leads and introductions
  41. 41. B Y D AV I D B R O W N
  42. 42. • Alternative Funding • A Market Place to bring lenders & borrowers together • Varied concepts across increasing number of Companies and Platforms • Business loans now available PEER TO PEER/CROWDSOURCING DEBT
  43. 43. • Began in 2005 with Zopa • 121% sector growth in 2013 • £1.2Billion cumulative Lending • Now Regulated by FCA from April 2014 • UK has most advanced website platforms • Folk2Folk 6th largest in UK PEER-TO-PEER LENDING SECTOR
  44. 44. • P2P Companies match creditworthy borrowers with investors looking for competitive returns • Loans posted onto website and auction the right to participate in Loans • Subscribed by multiple lenders, loan executed once sum raised • Website based platforms with varied models used in assessing Loans HOW IT WORKS
  45. 45. • Secured Lending only • Speed of decision making • Auction letters of credit • Local knowledge • Face2Face in addition to online proposition FOLK2FOLK IN THE SOUTH WEST
  46. 46. • Set up by the owners of Parnalls Solicitors in Launceston • Financial and Legal sector professionals • Local expertise • Quick decisions • Personal touch BACKGROUND
  47. 47. • Alternative option for their savings • Attractive returns • Secured loans • Spreading risk • Investing in the South West economy LENDERS BENEFITS
  48. 48. • Fast Local decision • Any purpose • Interest Only • Flexible BORROWERS BENEFITS
  49. 49. SECTORS 43% 8% 20% 15% 8% 6% Property Build/Purchases Renewables Commercial Development Agriculture Leisure Other
  50. 50. Funding and support round up Nicky Cornish Corporate/ Corporate Finance
  51. 51. www.francisclark.co.uk Grants, Debt, Equity and Support • Superfast Cornwall Fund - RGF funded - £1,000 to £50,000 grant towards 50% of project costs - SME looking to invest in “innovative technologies or activities that require the use of superfast broadband” - Cornwall and Isles of Scilly • Superfast Business Cornwall - ERDF Funded - Grant + Support + Contacts - SME - Transformational project; superfast enabled - Cornwall and Isles of Scilly
  52. 52. www.francisclark.co.uk Grants, Debt, Equity and Support Cornwall Development Company administered • Business Investment in Growth (“BIG”) Voucher Scheme Grants of £1,000 up to £50k Match funding “step change” expenditure High growth businesses Average £9k / job created Convergence http://www.francisclark.co.uk/blog/general/business-investment- for-growth-voucher-scheme
  53. 53. www.francisclark.co.uk Grants, Debt, Equity and Support Cornwall Development Company administered (ERDF) • Business Innovation Fund Grants from £1,000 to £50,000 for 50% of project cost “Projects at any stage of development process for new and existing products and services” “Project has to involve buying in specialist services from CUC universities, colleges and other Higher Education Institutions (HEIs), Intellectual Property solicitors, Market Research agencies, Process, Manufacturing or Product Design specialists” ERDF European Funding eligibility applies. http://www.francisclark.co.uk/news-views/blog/bif-bang-innovation-fund-for-smes-live-in- cornwall/
  54. 54. www.francisclark.co.uk Previously known as “Grant for R&D” Science, Engineering and Technology: New Products and Services Grant support for SMEs: • Proof of market (9 months, £25k, 60%) • Proof on concept (18 months, £100k, 60%) • Development of prototype (2 years, £250k, 35% / 45%) Competitive / Batch Applications Smart v R&D Tax Credits - cannot have both for same project Grants, Debt, Equity and Support SMART
  55. 55. www.francisclark.co.uk Grants, Debt, Equity and Support • SMEs and Large Companies • Part fund R&D Projects: eligible costs incl staff salaries, materials, equipment etc • Grants £25k to £150k • Development of new or improved products, technologies, processes or services • Job creation and/ or safeguarding • All funding to be issued by 30/4/15 • Application deadline 23rd May. Start with ROI form • www.innovation4growth.co.uk Innovation 4 Growth
  56. 56. www.francisclark.co.uk Grants, Debt, Equity and Support Other schemes • European Fisheries Fund  FLAG – Fishing businesses & Fishing communities  Axis 2 – Fish Processing • FITs, RHI etc.
  57. 57. www.francisclark.co.uk Grants, Debt, Equity and Support Others • Energy Efficiency Financing Scheme Siemens Financial Services and Carbon Trust Business trading > 36 months Investment in energy efficient equipment (and renewable energy generation?) Loan e.g., Interest rate c 9% for a 7 year term loan repayable in monthly instalments. • ReEnergise SmartEnergy Finance Investment in renewable energy and energy efficient projects £5m fund SMEs – loans of £25k to £250k on commercial terms Target sectors incl manufacturing, leisure and hospitality
  58. 58. www.francisclark.co.uk Grants, Debt, Equity and Support SWIG (RGF) • Available to most sectors, including those ineligible for European Funding • Maximum loan amount £100,000 (average £30,000). Minimum loan amount £10,000 • Maximum term 5 years. 10% fixed annual interest rate • Businesses must demonstrate investment will create or safeguard jobs • Available to start up and existing businesses
  59. 59. www.francisclark.co.uk Grants, Debt, Equity and Support Inspiras (Round 1 closed but further rounds anticipated) • Open to private, public or voluntary sector organisations in Devon, Cornwall, Somerset and the Isles of Scilly • Short-term loans of between £100,000 and £250,000, typically repayable over 3 years • Support the implementation of innovative projects which could potentially have a significant impact on the local (SW) economy Jobs Innovation Environmental legacy • No set intervention rate but expectation this will not exceed 75% • Business Plans to have been reviewed by professional • Gap funding
  60. 60. www.francisclark.co.uk Grants, Debt, Equity and support Routes to Equity • “Friends, Families and Fools” Include related businesses? • Networks e.g., SWAIN, • Conduits e.g., UEC Enterprises, GAIN? • Virtual Networks e.g., Crowdcube • Venture capitalists and Private Equity e.g., Business Growth Fund and Westbridge Capital
  61. 61. • Paul Saunders • Group Finance Director • Previously worked on a large Grant claim for a Cornish Co + the Welsh Development Agency
  62. 62. • Established in 1988 • 6 Leasehold sites across Walker Lines Ind Est, Bodmin • £15m t/o. Producing 25m pasties, sausage rolls and savoury slices. • 183 staff
  63. 63. • Acquired freehold of the Fitzgerald Lighting Factory from Administrators in 2009. • Forecasted savings of £500k pa • Potential audit weaknesses – jeopardise listings. • Uncompetitive – jobs at risk
  64. 64. • 1st Attempt – November 2010. • Convergence Programme • £800k Grant. • Deferred due to Financial Weakness • “On the Radar”
  65. 65. • PS appointed March 2012. • Fresh Review of Grant availability • Dave Bullen & Richard Wadman (FC) • Lobbying continued
  66. 66. • 2nd Attempt – April 2012. • Rural Economy Grant (REG) • Unlock significant rural economic growth. • £1m application watered down to £150k – “small print” • Deadline 30th April!
  67. 67. • 3rd Attempt – May 2012. “In it to win it” • Regional Growth Fund (RGF) • Deliver significant job safeguarding & creation. • Expression of Interest (8 pages) by 18 June. Outline plan of project spend & finance. • Create 50 new jobs = £1.5m towards £3.75m project
  68. 68. • On 20 July 2012 invited to complete full application – Deadline 10th September 2012 • Full Formal Application = 7 pages • Guidance Notes = 27 pages! • A4 Binder to include: Business Plan (13 pgs)/Audited accounts/ 2 yr Forecasts/Elements of Project cost/Funding structure/Market Research/CV’s/Co Policies/Independent Report/SWOT • Assisted by Rubina Khan @ CDC
  69. 69. • SCRUTINY!! – 2 months • Very constructive approach from David Furse @ CDC • Prep for Panel • Project over run/contingency/non essential aspects of project/job creation/ business growth/funding
  70. 70. • Agreed by Panel on 13th November 2012 and a conditional offer sent 5th December 2012 – 6 months since Expression of Interest • Completion of the prescriptive procurement process – involving tendering/defray by March 2015 • Evidence of all Funding • Legal Charge • “Claw back”
  71. 71. • DESPAIR – Despite grant award & obvious savings and efficiency gains. • January 2013 - Clydesdale Bank decided against providing matched funding. • Beauty parade • Changed to Santander in July 2013 • Commenced build in October 2013
  72. 72. • PRACTICAL ISSUES. • Bridging quarterly grant claims – impacts on cash flow. • Procurement process of tender/expressions of interest/scoring/selecting/contracts – takes time • I WOULD DO IT AGAIN • PERSEVERANCE = GAME CHANGER FOR US
  73. 73. Scott Bentley - Partner QUESTIONS AND ANSWERS? 10.55am to 11am
  74. 74. www.francisclark.co.uk What happens next? • 11.20 am to 12.25 am – “Of general interest” • Banks • Alternatives • Business support: national and regional • 12.25 pm – Networking • Coffee • One to one Q&A • Introductions/ set up meetings?
  75. 75. www.francisclark.co.uk (c) copyright Francis Clark LLP, 2014 You shall not copy, make available, retransmit, reproduce, sell, disseminate, separate, licence, distribute, store electronically, publish, broadcast or otherwise circulate either within your business or for public or commercial purposes any of (or any part of) these materials and / or any services provided by Francis Clark LLP in any format whatsoever unless you have obtained prior written consent from Francis Clark LLP to do so and entered into a licence. To the maximum extent permitted by applicable law Francis Clark LLP excludes all representations, warranties and conditions (including, without limitation, the conditions implied by law) in respect of these materials and /or any services provided by Francis Clark LLP. These materials and /or any services provided by Francis Clark LLP are designed solely for the benefit of delegates of Francis Clark LLP. The content of these materials and / or any services provided by Francis Clark LLP does not constitute advice and whilst Francis Clark LLP endeavours to ensure that the materials and / or any services provided by Francis Clark LLP are correct, we do not warrant the completeness or accuracy of the materials and /or any services provided by Francis Clark LLP; nor do we commit to ensuring that these materials and / or any services provided by Francis Clark LLP are up-to-date or error or omission-free. Where indicated, these materials are subject to Crown copyright protection. Re-use of any such Crown copyright-protected material is subject to current law and related regulations on the re-use of Crown copyright extracts in England and Wales. These materials and / or any services provided by Francis Clark LLP are subject to our terms and conditions of business as amended from time to time, a copy of which is available on request. Our liability is limited and to the maximum extent permitted under applicable law Francis Clark LLP will not be liable for any direct, indirect or consequential loss or damage arising in connection with these materials and / or any services provided by Francis Clark LLP, whether arising in tort, contract, or otherwise, including, without limitation, any loss of profit, contracts, business, goodwill, data, income or revenue. Please note however, that our liability for fraud, for death or personal injury caused by our negligence, or for any other liability is not excluded or limited. Disclaimer & copyright

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