Slides from Segment 2A ‘Start Ups and businesses trading for < 2 years’ of Francis Clark's Finance in Cornwall 2015 seminar held on 12th May in Newquay.

1. F
Finance in
Cornwall 2015
“71% of SMEs approach
only one provider of
finance”
Ivan Burnard – Partner
Start Ups and business
trading for < 2 years

2. www.francisclark.co.uk
Structure of morning
• Background, EU “calls” and the Banks (8:30am to 9:42am)
• LEP, Cornwall EU millions and “calls”
• Banks and SMEs
• Company presentation
• Grants, debt, equity and business support –
stratified by age of business (10:02 am to 11:22 am)
• Secured finance, alternative sources of finance,
business support (11.42 am to 1.00pm)
• State Aid
• Company presentation
• Q&A one to one / Networking (1pm to 2pm)

3. www.francisclark.co.uk
Funding and support
– for business <2 years old
• 6 to 8 minute presentations on:
• “Investment ready” x 2
• Start Up Loans (loan)
• Legal structures*
• SW Loan Fund (loan)
• A business angel network for Cornwall (equity)
• Get Set for Growth (support)
• VAT*
• Tax on Profits and SEIS*
(* = inherited slots from “Start Up Cornwall”)

4. Getting
investment
ready
Nicky Cornish
Corporate Manager

5. www.francisclark.co.uk
Matching requirements
Understand
your
requirements
Understand
funding
options and
funders
requirements

6. www.francisclark.co.uk
The Readiness Process
• When, why and what funding is needed
(Projections)
• Communicating the business proposition (Business
plan and projections)
• Viable plan and credible management
• Building the relationship

7. www.francisclark.co.uk
Investment ready – housekeeping
• Compliance and Legal
 Licences / contracts/ legal title?
 IPR ownership in the company?
 Statutory Accounts/management
accounts
 VAT, PAYE/NI, Books and records in
order?

8. www.francisclark.co.uk
Requirements: Grants
• “Project” eligibility – sector, size, location…
• Timescale – prescriptive, process and panels, not
retrospective
• Match funding
• ‘Need for grant’ versus viable proposition
• Other factors - Environment, Equality, on going
requirements

9. www.francisclark.co.uk
Requirements: Debt
• Serviceability & Headroom
• Security / Personal Guarantees
• Conduits for government initiatives
• Covenants – achievable / appropriate?

10. www.francisclark.co.uk
Requirements: Equity
• Exit route and returns to the investor
• Investors expertise vs. loss of independence?
• Be prepared to discuss valuation
• Be aware of FSMA regulations

11. www.francisclark.co.uk
Investor Ready - Conclusions
• Appropriate funding / understand the funder
• Sufficient information for a risk assessment
• Know the ‘deal breakers’
• Be prepared for “due diligence”
• Build in sufficient time
• There is assistance out there…

12. www.francisclark.co.uk
“You are often trying to persuade a stranger
to give you somebody else’s savings…”

13. SWIG Finance
Mark Thayre, Fund Manager
www.swigfinance.co.uk
info@swigfinance.co.uk
01872 223883

14. Who are
SWIG
Finance?

15. We finance businesses looking to
Start Up or Grow.
+ =
Business Support Growth

16. The Start Up Loans Scheme
A government-backed loan
scheme offering business advice,
a loan and on-going mentoring
support.

17. The Start Up Loans Scheme
Key Points
• Available to start ups and businesses
trading less than 24 months
• Available to all sectors
• UK-wide, government scheme
• SWIG Finance is the South West delivery
partner

18. Get in touch
www.swigfinance.co.uk
info@swigfinance.co.uk
01872 223 883
SWIG Services Ltd
Lowena House, Glenthorne Court, Truro Business Park
Threemilestone, Truro, Cornwall, TR4 9NY

19. LEGAL STRUCTURES
12th May 2015
Gavin Poole

20. Gavin Poole
Partner
Tel: 01872 265100
Email:g.poole
@stephens-scown.co.uk
Web: www.stephens-scown.co.uk

21. Drivers
• Why go into business?
• Tax
• Liability
• Current issues:
• Global: jurisdictions
• Local: philanthropy

22. Basics
• Vehicles
• Sole trader
• Partnerships...
• Trusts...
• Companies...
• LLPs
• PLCs
• Charitable Incorporated Organisations
• Community structures
• Overlays
• Models

23. Models
• [collaboration, joint venture, other] agreements
• Agency/distribution agreements
• Franchises
• Licences
• On-line arrangements

24. Sole trader

25. Partnerships
• Partnership Act 1890
• Joint liability with partners
• Each partner is an agent of the
partnership
• Partnership can be dissolved at will
• Profits and capital split equally (unless
clear evidence to the contrary)
• No valuation of partnership share
• No restriction on competition

26. Partnerships
• Partnership Act 1890
• Joint liability with partners
• Each partner is an agent of the partnership
• Partnership can be dissolved at will
• Profits and capital split equally (unless clear evidence
to the contrary)
• No valuation of partnership share
• No restriction on competition

27. Partnership case study
• Tim, Euan and Amanda
• Growing business
• Recruitment sought
• Euan’s change of heart
• Now need two partners
• Euan has become a troublemaker

28. 
• Euan cannot be expelled by the majority
• Euan can dissolve the partnership at any time
• Block on much needed recruitment
• If Euan has a lesser entitlement, unfair gain
• No mechanism to value Euan’s interest
• Euan could set up next door and threaten the existing
business.....ouch
Note to Tim and Amanda: all of these could have been
covered in a partnership agreement...double ouch!

29. Companies
• Model articles
• Generic
• Industry blind
• Limited provisions for:
• Directors
• Shareholders
• Administrative arrangements
• As shareholders
1. Decisions: show of hands (unless a poll is
demanded)
2. Quorum: two (unless single shareholder)
3. Chairman: chairman of the board/person appointed
by the meeting/the directors present

30. Companies
• Model articles
• Generic
• Industry blind
• Limited provisions for:
• Directors
• Shareholders
• Administrative arrangements
• As shareholders
1. Decisions: show of hands (unless a poll is
demanded)
2. Quorum: two (unless single shareholder)
3. Chairman: chairman of the board/person appointed
by the meeting/the directors present

31. Shareholder case study
• Charlotte, Andrew, Keith and Evelyn
• They each own 25% of the company
• Approaching 40 employees
• Keith is a workaholic...and dies
• Keith’s widow has never run a business
• Keith will leaves a legacy to a charity and his wife is the
main beneficiary

32. 
• Keith’s shares are in probate
• Widow (and charity) wants money for the shares
• No mechanism for valuing shares
• Shares could be sold to the highest bidder
• Remaining shareholders may not be able to afford to buy
• Widow will need to get involved in the business
• Widow/charity could block major decisions...until monies distributed
Note to all: all of these could have been covered in a shareholders
agreement... ouch!

33. LLPs

34. LLPs
• Limited Liability Partnerships Act 2000
• Retirement on death, dissolution or the giving of
“reasonable notice” to members
• Nominating designated members
• Sundry administrative arrangements
•Combination of previous

35. Community structures
• Co-operative societies
• Community benefit societies
• CICs
• Preservation of community assets/amenities
• Stephens Scown - first in Cornwall

36. Summary
• Structures are plentiful
• Structures are good
• Documented relationships give clarity
• The journey is helpful
• Insurance is in place
• Lack of clear structure will become a problem
• It is a false economy not to have structures

37. Stephens Scown Start-up package
• Bespoke
• Covers key issues
• Cost effective
• Swift turnaround
• Apply to Stephens Scown Cornwall Corporate Team:
corporate.cornwall@stephens-scown.co.uk

38. The information in this presentation is intended to be general
information only and should not be interpreted as legal advice.
English law is subject to change so whilst Stephens Scown LLP
seeks to ensure the information contained in this presentation
is up to date and accurate, the law can change quickly and no
guarantee is made as to its accuracy which means the
information should not be relied upon. Presentation slides
should not be viewed as an alternative to professional advice
and Stephens Scown LLP does not accept liability for any
action taken or not taken as a result of this information.

40. Tax on profits
and SEIS
Daniel Orasnjak, Tax Manager

41. www.francisclark.co.uk
Tax on profits (basics)
• Profits – generally accounts profits but adjust for:
• Depreciation (replace with Capital Allowances)
• Non-tax deductible expenses
• Sole trader/ Partnership / LLP – your share of profits taxed as
personal income (Income Tax)
• Personal Allowance - £10,600
• Basic Rate - (£31,785) 20%
• Higher Rate Band (£31,786 - £150,000) 40%
• Additional Rate (>£150,000) 45%
• Class 2 NIC - £2.80 p.w
• Class 4 NIC - (£8,060 - £42,385) 9%
(>£42,385) 2%

42. www.francisclark.co.uk
Tax on profits (basics)
• Company – 20% (Corporation Tax)
• Company money is not yours!
• Extraction: Salary, Dividends, Rent or Loan
• Dividends
• (Within Basic Rate) 0%
• (Higher Rate) 25%
• (Additional Rate) 30.55%
Comparison of structures for tax
Taxable
Profits
Sole
Trade/Partnership
Tax
Company
Tax
£40,000 £8,900 £8,000
£100,000 £33,789 £20,000
£150,000 £59,029 £30,000

43. www.francisclark.co.uk
Seed Enterprise Investment Scheme
• Rate of income tax relief – 50% up to maximum per investor of
£100k per year
• Capital Gains tax relief – 50% relief on capital gains realised on
asset disposals used to make SEIS investment. Exemption for
gains on SEIS investment if tax relief income tax relief claimed
• Mandatory investment period – 3 years
• Qualifying investment
• Cash for ordinary shares in unlisted company
• < 25 employees
• Net Assets < £200k
• Carrying out permitted activity
• Not controlled by another company
• Trade < 2 years old
• Raise a maximum of £150k under SEIS

44. www.francisclark.co.uk
SEIS/ EIS Qualifying activities
Trade carried on a commercial basis with a view to profit
Not permitted activities include:
• Dealing in land, shares and other financial instruments
• Banking and other financial activities
• Dealing in goods, other than ordinary retail or wholesale activity
• Letting or leasing assets on hire
• Legal and accountancy services
• Hotels/Care Homes

45. www.francisclark.co.uk
SEIS/ EIS: Conditions for The Investor
• Non-employees (Directors deemed not be employees)
• Must not hold >30% (with associates) of share capital, voting
power or entitlement to the assets on a winding up, during the
investment period
• Must subscribe for genuine commercial reasons and not as part of
a tax avoidance scheme

46. www.francisclark.co.uk
SEIS/ EIS: Further Considerations
• Get HMRC clearance re “permitted activities”
• Forms/ paperwork to HMRC
• Maintain qualifying company status for 3 years

47. www.francisclark.co.uk
Enterprise Investment Scheme
• Rate of income tax relief – 30% up to maximum per investor of
£1m per year
• Capital Gains tax relief – Hold Over relief. Exemption for gains
on EIS investment if income tax claimed
• Mandatory investment period – 3 years
• Qualifying investment
• Cash for Ordinary shares in unlisted company
• < 250 employees
• Net Assets < £15 million
• Carrying out permitted activity
• Not controlled by another company

48. Jess Ratty, Crowdfunder

49. About Crowdfunder
A community of over
150,000
crowdfunders
Supporting over
11,000
projects
Raising over
for UK crowdfunding
£4million
Today
community groups, charities,
start-up businesses and people with
great ideas started projects with us . . .
124
Project numbers growing
400%
every year

50. What is crowdfunding?
There are three different types of
crowdfunding
Equity Lending Rewards
• Sell a % of your
established business
for money
• Dragons’ Den
• Borrow money online
from lots of people
rather than the bank
• Peer to peer
• Minibond
• Only type that
helps start-ups
• People pledge money in
return for rewards
• Crowdfunder has raised
over £4M for 1,000’s of
UK projects

51. Rewards crowdfunding is
best explained by example
1. Phil from Leeds wanted to start
up a bakery
2. He needed £8,000 to purchase
a bread oven
3. The bank wouldn’t lend
4. He created a project
on Crowdfunder
5. And raised over £8,000
from 114 people
“Pledge £100 for a loaf of
bread every week for a year”

52. Benefits to the projects
It’s so much more than money . . .
Validation
Marketing
Funding
Advocates

53. The Crowdfunder Academy
We work with crowdfunding
projects to ensure they have
the greatest opportunity to be
a crowdfunding success using a
range of proven tools and tactics
• Online guides
• Videos
• Tutorials
• Workshops
• Telephone support

54. Some of our partners

55. Charities
4,000 children
had a Christmas
Individuals
Our British athletes
went to the
Winter Olympics
Enterprising
start-ups
flourished
Community
Football was
brought back to
the community
Innovative
businesses
are making
waves
Project impact

56. partners@crowdfunder.co.uk
Crowdfunder
@crowdfunderuk
@presenter
Get in touch

57. VAT
Julie Towers,
Partner VAT Services
May 2015

58. www.francisclark.co.uk
VAT registration
• Taxable income
• Threshold £82,000 from 1 April 2015
• Last 12 months
• Next 30 days
• Exemption if income predominantly zero-rated
• Exception if ‘one-off blip’ and turnover in next 12 months is expected
to be below deregistration threshold (£80,000).

59. www.francisclark.co.uk
VAT registration
• Voluntary registration can be requested where it is advantageous to
register before the threshold is breached
• Only zero-rated income
• Recovery of VAT on expenditure
• VAT can be recovered on expenditure incurred by the taxpayer
before registration
• Services in previous 6 months
• Goods purchased in previous 4 years
• VAT can be recovered on pre-incorporation expenditure in certain
circumstances

60. www.francisclark.co.uk
Overseas issues
• Purchase of goods from EC suppliers can trigger liability to register in
the UK
• Similar rule for services from any non-UK supplier
• EORI required for import of goods from non-EU country
• Most income from overseas customers counts towards the VAT
registration threshold. Exceptions:
• Most services provided to businesses in other EC countries
• Most services provided to any customer outside the EC
• Additional compliance for trade with EC countries

61. Business Support & Equity Investment
Francis Clark - Finance in Cornwall
Tuesday 12th May 2015
Matt Giles – Programme Director
John Acornley – Business Equity Finance Advisor
#getsetforgrowth

62. The Investment Readiness and Growth Service for
ambitious businesses in Cornwall and the Isles of Scilly

63. GetSet Business Support
Bespoke & Impartial 1:1 Advice

Investment Readiness

Finance Support

Marketing & Sales Support

Business Model Validation
GetSet KnowHow
Angel Investor Network

Equity Investment Advice

Mentoring Service

Non-Exec Director Network

KnowHow Board
What we do..

64. Businesses Supported: 220 (20% start-up, 80% existing)
Finance Secured: £2.4m (debt, equity, grant, crowd)
Current Finance Pipeline: £1.1m (applications pending)
Jobs Created/Safeguarded: 190
Combined Turnover: £39m
Achievements to date

65. 1 in 5 are unsure of best route to finance
45% have never applied for any source of external finance
prior to engaging with GetSet
50% of business relied solely on personal savings to finance
their business
GetSet funding success rate is 98%
Business Insight

66. Equity Investment
John Acornley - Business Equity Finance Advisor
john.acornley@getsetforgrowth.com
#getsetforgrowth

67. Angel Investment

Private Equity/Venture Capital

Equity Crowdfunding
We have built a network of equity investors who wish to invest
in businesses based in Cornwall & Isles of Scilly
Equity – Main Types

68. Individual or small group of individuals

Looking to invest money

May or may not want a Board seat

Want a good return from their investment
Angel Investment

69. Firm set up to invest equity into businesses

Can usually invest larger amounts of money

Will probably want a Board seat

Have resources to help growth
Private Equity/Venture Capital

70. Business wants some funding and possibly external help.
(Angel)
Business can’t deliver the plan without the funding and the
external help
(Private Equity)
When Should Equity be Considered?

71. Aroma Chemicals – High Growth
Angel invests £30k for 3% of business

Business initially valued at £1m

Angel takes Board seat (Chair)

Business grows and is sold for £20m four years later
Example: Angel Investment

72. Rainford Group plc – Acquisition & High Growth
Business raises £1m equity for 25% of company

Buys GEC division for £750k cash and £750k deferred

Grows combined business and sells five years later for £80m
Example: Private Equity

73. Strong management team

Credible high growth Business Plan

Potential to return 5-10 times initial investment

Exit strategy

EIS/SEIS approval (for Angel investment)

Good advisers (corporate finance, tax, legal)
What Investors Look For

74. Banks- Practical Tips on
Approaching a Bank Manager
Dan Sampson Cert BB&C
Business Manager
RBS (The Future Williams & Glyn)

75. Technology to help Banking
• Social Media
• Website
• Telephone
• Letter
• Walk into a Branch

76. Reasons to Approach a Bank
Manager
• Start the Relationship
• Obtain Advice
• Borrow Money
• Updates on trading
• Introduce Friends and Relatives
• Make a Complaint
• End the Relationship

77. What is your purpose?
• Funding
• Advice
• A new relationship
• Discuss the service you receive
• Maintain your relationship
• Add or remove parties to the account

78. Information you may need to
provide.
• Identification
• Address Verification
• End of year accounts/tax returns
• Security
• Business plan/proposal
• A contribution to the deal

79. Things to include in your business
plan
• A C.V. of the people involved
• The businesses products/services
• USP (Unique Selling Point)
• Competitor Analysis
• Details of customers and market
• SWOT Analysis
• The proposal
• Your contribution to the deal

80. SWOT Analysis- Pasty Shop
Strengths
• Well known/liked
product
• Protected Status of
product
Weaknesses
• Increased VAT on
items kept hot.
Opportunities
• New flavours can be
created
Threats
• Competitor on next
street

81. Summary of Tips
• Don’t be afraid to approach the Bank
Manager
• Have an end goal in mind
• Prepare questions you want to ask

82. Contact Details
Dan Sampson Cert BB&C
Business Manager
RBS (The Future Williams & Glyn)
Penhaligon House
Green Street
Truro
TR1 2LH
Tel: 01872 223681
Email: Daniel.Sampson@Rbs.co.uk

83. Contact Details
Geo Fairweather
Customer Advisor
RBS (The Future Williams & Glyn)
Penhaligon House
Green Street
Truro
TR1 2LH
Tel: 01872 223344
Email: Georgina.Fairweather@Rbs.co.uk

84. www.francisclark.co.uk
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