5 ways to raise cash for small and medium sized businesses

1. 5 ways to Raise Cash for Business
Budget & Financial PlanningRisk Assessment Corporate Planning Working CapitalMargin Improvement

2. FD4 – 5 requirements for cash
1. Fund growth
2. Invest in capital, plant, stock, premises,
staff
3. Ride through a cash crunch
4. Fund a merger or acquisition
5. Start a business
Passionate about adding value to your business

3. FD4 – 5 things to consider
1. How much?
2. Why: capital purchase, employment, liquidity
3. When: how long will it be needed
4. What: Internal v External
5. Who: Partner, investor, lender, which in turn depends
on
• Attitude to risk – offer up personal assets as security –
• Level of valuable assets in the business for security
• Whether or not you’re willing to concede some
element of control and profit in the business
Passionate about adding value to your business

4. FD4 – 5 sources of Finance
1. Internal
2. Equity
3. Bank overdraft/loan
4. Government Grants
5. Asset financing
Passionate about adding value to your business

5. FD4 – 1. Internal sources
Cost cut, delay discretionary spend
Maximise working capital, debtors,
creditors and stock
Retain profits in the business, scrap
dividends
Tax planning, maximise incentives such as
R&D tax credits
Passionate about adding value to your business

6. FD4 – 2.Equity
Venture capitalist, Business Angel, private equity, friends and
family
Advantages include:
Investors have expertise and contacts
No interest payments, or personal collateral
Risk shared amongst many
Disadvantages include:
Complicated and expensive process, legal and regulated
Diluted share in business
Loss of control over business decision making
Passionate about adding value to your business

7. FD4 – 3. Loans
Advantages include:
They are not repayable on demand
Can be tied to the lifetime of equipment or other
assets
Can retain control and share of profits
Disadvantages include:
May pay charges if you repay early
May struggle to meet monthly payments
May lose security
Passionate about adding value to your business

8. FD4 – Overdraft
Advantages include:
Flexible - only borrow what you need and so
cheaper than a loan
Quick to arrange
Not penalised for paying off early
Disadvantages include:
Charges: to extend your overdraft or exceed limit
Can be withdrawn at a moments notice
Restricted to your own bank
Passionate about adding value to your business

9. FD4 – 4. Governmental Grants
Advantages include:
No need to pay back or pay interest
Keep control over the company
Disadvantages include:
Grants are for only certain purposes
Much competition
May have to put up matched
Awarded for new initiatives not
Difficult and time consuming applications.
Passionate about adding value to your business

10. FD4 – 5. Asset financing
Advantages include:
Leasing or renting assets helps cashflow, delayed purchase
Access to assets that are unaffordable
No potential loss of personal assets, only the past payments and
asset.
Breakdown is the reasonability of lease company
it’s widely available
Disadvantages include:
Tax loss – capital allowance
More expensive than outright purchase
Expensive to get out of agreement
Probably need a deposit
Passionate about adding value to your business

11. FD4 – Invoice factoring
Debt factoring – sell debts to 3rd party who collect the
debts.
They advance approx. 85% to you upfront and pay the
balance minus fees on receipt from the customer
Advantages of factoring include:
3rd party looks after sales ledger, credit check customers and
chase debts.
Disadvantages
Can wipe out customer profit
Reputational risk if 3rd party deals badly.
Passionate about adding value to your business

12. FD4 – Invoice discounting
Invoice discounting
3rd party lends money against unpaid invoices – at an agreed
percentage of their total value. For a fee.
Advantages of invoice discounting include:
Confidential
Retains customer contact
Disadvantages
Loss of profit
Restricted to B2B
Loss of debt book to secure alternative funding
Passionate about adding value to your business

13. FD4 – 5 things to do right
1. Set a goal for the money, outcome, return on investment
2. Produce a business plan to show credibility and returns
for an investor
3. Choose partners well, shared beliefs, congruent
personalities, values
4. Get company affairs in order, contracts, accounts,
management structure
5. Know the value of you business
Passionate about adding value to your business

14. FD4 – case study
Biotech client wanted cash to fund more R&D to create
value for trade sale.
• No assets to act as collateral for loan
• Venture loans too expensive
• No debt or stock, only creditors to stretch
• No opportunities for asset financing
• Only option was equity and grants
• Raised £20m and secured £2m TSB grant
Passionate about adding value to your business
And so much more….

15. FD4 – How we did it
Short list: who has got money, who is interested in this space, who is
targeting late stage assets, have we seen them before (any new news).
Term sheet, set a share price/company valuation, liquidation
preference, pay to play – modelling.
Investment returns modelling, Biotech multiples and recent
deals in space & stage
Due diligence – BS liabilities, off BS liabilities
Legals: Reviewed and advised on: Article changes, shareholder
and subscription agreements.
Passionate about adding value to your business
And so much more….