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Brian Dorricott Presentation
The document outlines different sources of funding for businesses, including friends and family loans, grants and competitions, crowd sourcing, bank loans, hire purchase, factoring, trade finance, revenue based finance, business angels, and venture capital. Each funding type is summarized, including typical deal sizes, terms, requirements for collateral, business valuations, sales, equity stakes, costs of money, and time to complete a deal. Business angels and venture capital typically provide larger amounts of funding but require equity stakes, while other options like loans, crowd sourcing or grants may have lower costs but also smaller maximum deal sizes.
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Brian Dorricott Presentation
- 1. The Funding LadderTheFunding Ladder Bristol & Bath Enterprise Network Monday, 22nd November 2010 1 Brian Dorricott Business Mentor, Coach and Investor http://www.meteorical.co.uk brian.dorricott@meteorical.co.uk
- 2. Finding MoneyFinding Money Generalprinciples ◦ Terminology ◦ Things to sell ◦ Enhancing chances of success Funding type summary More information 2
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- 4. Return on InvestmentReturnon Investment Also known as: ◦ Cost of money ◦ Internal Rate of Return Inflation + Costs + Risk premium 4 Years 1% 5% 10% 50% 100% 1 1.01 1.05 1.10 1.50 2.00 2 1.02 1.10 1.21 2.25 4.00 3 1.03 1.16 1.33 3.38 8.00 4 1.04 1.22 1.46 5.06 16.00 5 1.05 1.28 1.61 7.59 32.00 10 1.10 1.63 2.59 57.67 1024.00 Return = ( 1 + IRR) years
- 5. EquityEquity Company is alegal entity Company has value ◦ Equity is name given to that value Company has owners ◦ Equity is shared between owners Shares in company ◦ Dictate rights to company assets ◦ Control over company proceedings 5
- 6. Things to sellThingsto sell Assets ◦ Cars, vans, computers, property Immediate future ◦ Customer purchases ◦ Invoices Ability to pay ◦ Loans Dreams ◦ Equity 6
- 7. Enhancing Chances ofSuccessEnhancing Chances of Success Sales process ◦ Selling company’s assets / future ◦ Not just the MD / CEO! Be prepared ◦ One chance... Learn from others ◦ AngelsDen ◦ Collegues ◦ Advisors 7
- 8. SCOTSMANSCOTSMAN Solution Competition Only me /uniques Time bound Size Money Authority Need 8
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- 11. Only me /uniqueOnly me / unique 11
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- 17. The Funding LadderTheFunding Ladder Overview ◦ Quick review of each option You choose! Contact information ◦ Website 17
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- 19. Your choice...Your choice... Friends& family Grants & competitions Crowd sourcing Loans & debt Hire Purchase Factoring and CID Trade Finance Revenue Based Finance Business Angels Venture Capital 19
- 20. Friends & FamilyFriends& Family 20
- 21. Friends & FamilyFriends& Family Based on personal relationships. Little or no sale of equity required. Immediate cash. Little or no valuation of idea itself. Can sour personal relationships. Generally low value (<£50K). 21
- 22. Friends & FamilyFriends& Family Deal size Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time to £50K No No No May be May be 0% months 22
- 23. Grants & CompetitionsGrants& Competitions 23
- 24. Grants & CompetitionsGrants& Competitions No requirement to pay back. No sale of equity required. Can include press coverage Generally low value. Targeted at dis-advantaged. Availability changes. 24
- 25. Grants & CompetitionsGrants& Competitions Deal size Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time to £50K n/a No No No No Often 0% Many months 25
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- 27. Crowd SourcingCrowd Sourcing Creditprofile different. No need to value company. No sale of equity required. Bad debts pursued. New, untested form of financing. Partial success... no funding at all. 27
- 28. Crowd SourcingCrowd Sourcing Dealsize Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time to £50K 3 to 5 May be No No No No 7% to 12% months 28
- 29. Loans & debtLoans& debt 29
- 30. Loans & debtLoans& debt No sale of equity required. No need to value company. Money available immediately. Failure to repay... foreclosure. Evidence how loan will be paid back. Secured against tangible assets. 30
- 31. Loans & debtLoans& debt Deal size Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time any 5 to 10 years Yes No Yes No No 2% - 5% months 31
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- 33. Hire PurchaseHire Purchase Canbe used to assets. Asset available immediately. Can reclaim VAT immediately. Personal guarantees needed. Can’t fund cash flow. May be challenged by HMRC. 33
- 34. Hire PurchaseHire Purchase Dealsize Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time any 3 to 10 years Yes No Yes No No 8% - 20% month 34
- 35. Factoring & CIDFactoring& CID 35
- 36. Factoring & CIDFactoring& CID Immediate cash. The customers don't know. No need to value company. Significant turnover (usually £1M+) Can be expensive. Still need to collect payments. 36
- 37. Factoring & CIDFactoring& CID Deal size Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time £50K + No No Yes No No 10% - 15% 1 month 37
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- 39. Trade FinanceTrade Finance Fundingfor all purchases. No need to value the business. Funding increases with business. Used against firm orders. Back to back with Invoice Finance. Two charges increase overall costs. 39
- 40. Trade FinanceTrade Finance Dealsize Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time £50K+ Yes No Yes No No 8% to 25% 1 month 40
- 41. Revenue Based FinanceRevenueBased Finance 41
- 42. Revenue Based FinanceRevenueBased Finance No security or equity required. No need to value company. Investors want company to grow. Need revenue stream. Cost higher than bank loan. New class of funding in the UK. 42
- 43. Revenue Based FinanceRevenueBased Finance Deal size Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time £50K - £250K 3 to 5 years No No Yes No Yes 20% - 30% 1 – 3 months 43
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- 45. Business AngelsBusiness Angels BAsmay help the business grow. Money available immediately. No security required. Deals can take a long time. Equity must be sold. High growth potential and exit. 45
- 46. Business AngelsBusiness Angels Dealsize Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time £50K - £250K 3 – 10 years No Yes No Yes May be 30% - 60% 2 to 9 months 46
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- 48. Venture CapitalVenture Capital Largesums of money available. Minimum investment is £2M. Team of experts available. Equity must be sold. High growth potential and exit. Deals can take a long time. 48
- 49. Venture CapitalVenture Capital Dealsize Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time £2M + 3 to 10 years Yes Yes No Yes May be 30% - 60% 2 to 9 months 49
- 50. Useful websitesUseful websites BusinessLink ◦ http://www.businesslink.gov.uk Meteorical ◦ http://www.meteorical.co.uk Funding section Business Angel Network listing 50
Editor's Notes
- #12 What can you offer that other’s can’t?