This document summarizes various funding options available to small and medium enterprises (SMEs) in the UK. It discusses government-backed grant programs like the Regional Growth Fund that provide up to 30% of project costs. It also outlines loan programs from sources like the British Business Bank, SWIG, and Santander. Alternative financing options like crowdfunding platforms are mentioned as well. The document provides details on eligibility and terms for these various funding sources aimed at helping UK SMEs obtain financing.

1. Funding Update
December 2014
David Bullen & Richard
Wadman

2. Banks – a tale of two graphs
Source: Bank of England
www.francisclark.co.uk

3. Banks – a tale of two graphs
•
www.francisclark.co.uk

4. Appetite and Leverage
• “£7.9 billion of new SME borrowing was approved in Q3,
around 13% more than in the same quarter last year and
the highest quarterly amount since 2011” - https://www.bba.org.uk/news/statistics/sme-statistics/
bank-support-for-smes-3rd-quarter-2014/#.VHi3wFIqWpo
• All are now “open for Business” – but the definition of
‘Business’ varies!
• Frontline enthusiasm, often not matched by Credit
• Non-financials/reputational risk
• Significant variation in approach/process
www.francisclark.co.uk

5. Appetite and Leverage
• Depends on the nature and structure of a transaction
– expansion/acquisition/MBO
• Generally 2.5 - 3X EBITDA
• But competition will drive higher
www.francisclark.co.uk

6. Rates and Terms
5.50
5.00
Lending rate (%)
4.50
4.00
3.50
3.00
Jan…
May…
Sep…
Jan…
May…
Sep…
Jan…
May…
Sep…
Jan…
May…
Sep…
Jan…
May…
Sep…
Jan…
May…
Source: Bank of England
www.francisclark.co.uk
SME Lending Rates (margin over base)
All SMEs
Should look to achieve lower margins than above + care margin over
what?

7. Rates and Terms
• Likely to go up –
but not by much for a
while
• Lending documentation
continuing to grow
• Harsh terms for
Borrowers?
• SME negotiating position
generally weak – but can to
look to very “standard
terms”
Predicted UK interest rate changes:
• Personal guarantees - easy to give, hard to get
back
www.francisclark.co.uk
Source: www.thisismoney.co.uk

8. Funding Landscape (Non-bank)
• https://www.gov.uk/business-finance-support-finder
• 630 schemes (down from 742 schemes)
• Main sources of grants, include
• EU funds (ERDF and ESF)
• Regional Growth Fund
• British Business Bank
• City Deals
• Big Lottery
• Innovate UK (Technology Strategy Board)
www.francisclark.co.uk

9. External Funds – The Sources
Regional Growth Fund
• Monies left behind on dissolution of RDA’s
• £2.4bn
• 2011 to 2015
• Applications > £1m
• Competitive process
• Round 6 open
• RGF funded schemes for SMEs
• Incl; PWGF1, PWGF 2, GGF+ and Assisted Asset Purchase
• Not sector specific, criteria different for individual schemes
www.francisclark.co.uk

10. External Funds – The Sources
EU
• Convergence: Cornwall 2007 to 2013
• EU (announced June 2013)
Cornwall: €592.9 million (£507 million) between 2014-2020
Devon and Somerset:118 million euros (£100 million).
• Eligibility
Location, Displacement, Quality Jobs, Sector exclusions
www.francisclark.co.uk

11. “State aid”
Key phrases
• “De minimis” (< 200,000 euros over 3 fiscal years)
• Block exemption
• Assisted Area
Care
• Other grants
• R&D Tax Credits
• EIS/ SEIS
• Enterprise Finance Guarantee Scheme
www.francisclark.co.uk

12. Grants, Debt and Equity - Funds
RGF: Individual applications (> £1m)
• Quality projects
• Generate private sector investment and
create sustainable jobs.
• The level of grant is subject to State Aid
rules
• Robust need for grant argument.
• Maximum grant intervention rate c 30%:
• Round 6 applications now being assessed.
• Some Francis Clark successes in previous
rounds and some being assessed now..
www.francisclark.co.uk

13. Grants, Debt and Equity - Funds
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-
www.francisclark.co.uk
for-growth-voucher-scheme
Closed – Kind of!

14. Grants, Debt and Equity - Funds
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/
www.francisclark.co.uk

15. Grants, Debt and Equity – The Funds
Cornwall Marine Capital Fund – Round 2 is open now
• Grant funding £50k - £500k for Cornish/ SW based businesses operating in
the marine sector;
• Intervention rate 10%-40% depending on value for money, size of business
and direct jobs created (large businesses can receive no more than 30%);
• Eligible costs are capital investment into equipment (new and modernisation),
premises (building new, modernisation, fit out and bringing old businesses
back into use) and marine renewable technology development;
• Allocation of funds to projects within the programme will only be made once
proof of match funding has been seen.
• Start with an online EOI
• http://www.cornwallmarine.net/52/about-cornwall-marine-network-6/rgf-
201/major-new-funding-opportunity-for-cmn-members-376.html
www.francisclark.co.uk

16. Grants, Debt and Equity – The Funds
RGF Funded
• Assisted Asset Purchase Scheme
Grant contribution to deposit on Asset Purchase
Parameters depend on bank e.g., Lloyds
• Grants < £500k
• 20% for Small Co and 10% for Medium Co
• 1 job created or safeguarded for £15k grant
• No minimum deposit from own funds (?)
• Balance of funds (min £100k) from Lloyds TSB
Lloyds TSB closed. HSBC AAP is closed. Nat West/ RBS is
open. Ignition Credit is open
www.francisclark.co.uk

17. Grants, Debt and Equity – The Funds
SMART
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
www.francisclark.co.uk

18. GROW: OFFSHORE WIND
Funding available for:
• Tangible assets: such as purchasing additional land,
new buildings, plant, machinery and equipment
• Intangible assets: for example, securing patent rights and
licenses
• Employment costs: investment needed to meet wage costs
resulting directly from an offshore wind investment project[1]
• Access up to 30 per cent of project costs, with a
maximum total programme funding cap of £500,000.[2]
[1] Note: All funding must meet European Commission funding criteria. Applicants will be supported by their
GROW:OffshoreWind advisor to understand relevant criteria.
[2] For SMEs in a limited number of European Commission designated Assisted Areas there is scope to fund up to 50 per
cent of eligible project costs.
http://www.growoffshorewind.com/

19. Grants, Debt and Equity – The Funds
Coming soon – North Devon Plus
• RGF backed grant scheme
• HoSW LEP area only
• ‘Formal’ launch expected early 2015
• Likely process (still to be signed off by BIS):
• EOI (£100 fee)
• Prepare application documents and submit (with/without assistance)
• ‘Internal’ DD
• Panel meeting; if approved
• External DD – We will (likely) be tendering for this work
• Formal decision
www.francisclark.co.uk

20. Grants, Debt and Equity – The Funds
Coming soon
• RGF backed scheme
• EU funding
• 2015
www.francisclark.co.uk

21. Grants
Factors contributing to a successful application…
1. Project
2. Eligibility
3. Robust Business Case
4. Business Plan (and Financial Projections)
5. Dialogue with fund holders
6. Understanding their requirements: strategic and operational
7. Need for grant
8. Patience/ Completeness
9. Understanding timelines
10. Match funding – seldom 100% intervention and seldom pay in
advance of defrayal
www.francisclark.co.uk

22. Grants, Debt and Equity – The Funds
SWIG and FC Fund Managers administered
• South West Loans Fund
Up to £50k – SWIG
£50k to £250k – FC Fund Managers
Commercial terms for viable growth businesses [with
funding gap]?
www.francisclark.co.uk

23. Grants, Debt and Equity – The Funds
SWIG administered
• Start Up Loans (Also available from Outset Finance -
business trading < 1 year)
Loans between £500 and £9,900 @ low interest rate (6%)
Flexible repayment terms
Fully funded business advice putting together business plan
Fully funded support from a business mentor for a year
http://swigstartups.co.uk/what-we-do/
• Microcredit Fund
Loans of up to £7,500; 3 year term @ commercial rate of
interest. 2% arrangement fee.
Start-ups and existing businesses in Plymouth, Torbay, Bristol,
Swindon and parts of Western Super Mare
www.francisclark.co.uk

24. Grants, Debt and Equity – The Funds
SWIG administered
• £1.2 million loan fund
• Funded by RGF
• Aimed at South West micro, small and medium sized businesses, with growth
potential, which are unable to secure all the funding they need (i.e. from the
bank);
• Available to most sectors, including those ineligible for European Funding;
• Loans £10,000 - £100,000 (average £30,000)
• Maximum term 5 years
• 10% fixed annual interest rate
• Arrangement fee of 2% of loan amount payable on loan draw down
• Businesses must demonstrate investment will create or safeguard jobs
• Available to start up and existing businesses
• application process starts by completing an eligibility form
• http://www.francisclark.co.uk/news-views/blog/south-west-investment-group-swig-
add-new-loan-to-their-arsenal/
www.francisclark.co.uk

25. Grants, Debt and Equity – The Funds
The Banks…including
• Santander’s Breakthrough fund
£200m for SMEs (turnover < £25m)
Mezzanine Loan
Interest only: 5% over LIBOR paid quarterly, further 5% rolling
up
No set limits on sums borrowed but c £500k to £3m
Not for start-ups
Track record of profitable and cash generative growth (20% pa)
www.francisclark.co.uk

26. Grants, Debt and Equity – The Funds
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
www.francisclark.co.uk

27. Grants, Debt and Equity – The Funds
Routes to Equity
• “Friends, Families and Fools”
Include related businesses?
• Networks e.g., SWAIN, OXIN
• Conduits e.g., UEC Enterprises, GAIN?
• Virtual Networks e.g., Crowdcube
• Venture capitalists and Private Equity e.g., Piper
Private Equity, Altitude Partners LLP, Longwall
Venture Partners, LDC or Dunedin
www.francisclark.co.uk

28. Grants, Debt and Equity – The Funds
Routes to equity – government led interventions
• Business Growth Fund
Commercial Fund
Bank financed
Investments of b/w £2m and £10m
Minority stakes
Relaxed on sectors – but no property or financial services
T/over > £5m (but will speak to clients earlier)
www.francisclark.co.uk

29. Grants, Debt and Equity – The Funds
Routes to equity – government led interventions
• Angel CoFund (RGF)
Initial Equity Investments
£100k to £1m
Alongside syndicates of Business Angels
Upper limit of 49% of any investment round
No direct applications by SME
www.francisclark.co.uk

30. The funds…
Crowdsourcing
• Equity e.g.,
• Crowdcube - http://www.crowdcube.com/
• BrewDog - http://www.brewdog.com/equityforpunks
• Debt e.g.,
• Funding Circle https://www.fundingcircle.com/
• Folk 2 Folk http://www.folk-folk.com/
• Rewards e.g.,
• Crowdfunder http://www.crowdfunder.co.uk/
www.francisclark.co.uk

31. UK Alternative Finance Industry
• The UK Alternative Finance Industry Report 2014
• Different models (pg 8)
• 44 facts… (pg 10)
• P2P Business Lending (pg 28)
www.francisclark.co.uk

32. MAS
www.francisclark.co.uk

33. UKTI
Support to........
• Develop an export strategy – Passport to Export (£3,000), Gateway to
Global Growth (£3000)
• Undertake market research (including identifying potential partners) –
EMRS (50% match), OMIS (subsidised)
• Visit & develop new export markets – MVS (£200-£850)
• Improve international communications: website, email, languages &
culture – ECR (subsidised), ECR EV (£3000)
• Exhibit overseas – TAP & TAP SOLO (£1,000 to £2,500)
• Carry other marketing and sales development activities - European
funding (ERDF) (£1,000 to £30,000)
www.francisclark.co.uk

34. Growth Vouchers
Launched end of January 2014
50% subsidy up to £2k for advice on:
• Managing cashflow, late payments and negotiating finance
• Developing skills and taking on staff
• Improving Leadership and Management
• Marketing, attracting and keeping customers
• Making the most of digital technology
• www.gov.uk/government/collections/growth-vouchers-programme
• https://marketplace.enterprisenation.com/
• http://www.francisclark.co.uk/news-views/blog/growth-voucher-scheme/
www.francisclark.co.uk

35. GrowthAccelerator
• Mentoring / 7 days coaching
• Leadership & Management (“L&M”)
• subsidised assistance with projections for example, £2k per
member of management team
• Costs
• Companies with 1-4 employees – £600 plus £700 VAT
• Companies with 5-49 employees – £1500 plus £700 VAT
• Companies with 50-250 – employees - £3000 plus £700 VAT
www.francisclark.co.uk

36. GrowthAccelerator - NEW
• Growth Impact Pilot: L&M available to growth businesses:
• Registered in UK and based in England;
• <250 Employees; and
• T/o £250k - £2m at time of joining.
• Key areas:
• Developing and effective personal leadership and management style
• Leading and managing high performance
• Planning and developing an effective organisation
• Sustaining growth and continuous improvement
• Embedding a culture of innovation
• New market entry
1 in 2 then receive offer of additional specialist coaching scheme but only £700 VAT
is charged (fee met by GrowthAccelerator).
www.francisclark.co.uk

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