This document summarizes various business finance options for companies. It discusses the main differences between debt and equity financing. It also outlines specific financing options like bank loans, asset financing, factoring, and regional funding schemes. The document provides advice on meeting the expectations of funders for both debt and equity. It emphasizes the importance of a strong business plan and financial forecasts in preparing for and obtaining financing.

1. Business Finance Options – The Choices Simplified Business Link A 2 F

2. Introduction Mike Stutter & Andy Weeks Business Finance Advisers A 2 F

3. Agenda Finance - what are the options? Expectations of funders Debt and Equity Government & Regional finance schemes Preparing for funding & business plans Additional support from Business Link A 2 F

4. Finance- what are the options? Debt and Equity – main concepts and differences The affects of equity dilution and the risks of debt to a company Financing must be driven by the business strategy, not vice versa A 2 F

5. Types of Finance Bank Lending - Overdrafts & Loans Enterprise Finance Guarantee Asset Finance Factoring and Invoice Discounting Regional Funds & Secondary Lenders A 2 F

6. Historically provide Overdrafts and Loans Requirements :- Demonstrable ability to repay Tangible Security e.g. Freehold Deeds, Life Policies ,personal guarantees etc. Financial Viability (Ratios) % margin above base rate Track record Banks A 2 F

7. Working Capital Debtors Stock Work in Progress Creditors A 2 F

8. Ratios Stake Current Ratio (Assets V Liabilities) Net Worth (Solvency) Interest Cover (Serviceability) A 2 F

9. Asset Finance Purchase of Equipment Refinance of existing equipment i.e. buy back Security is the asset but additional security may be required such as personal guarantees or charge over property. A 2 F

10. Factoring and Invoice Discounting - Finance is tailored to working capital needs ‘ Automatic’ support for growth Security is the invoice raised Leaves other business assets available as security Care old perception of factoring is lending of last resort Customer relationships may be damaged (factoring) If sales reduce , the facility will reduce. A 2 F

11. Enterprise Finance Guarantee (EFG) Replaces SFLGS Accredited Lenders Min £1K –Max. £1m Currently 75% of debt guaranteed by Government Premium of 2% is payable New credit lines & refinancing of existing overdrafts permitted Personal Security allowable – but unsupported A 2 F

12. Regional Schemes & Secondary Lenders South West Loan Fund Small Loan Scheme – max £50k Business Loan Scheme - £50k+ Max 5 years Solvent growth businesses Carbon Trust Loans - Equipment Other Locally Based Regional Funders e.g Enterprise Development Funds A 2 F

13. Equity and where to find it The nature of company ownership Must be Limited Company Sources Venture Capital and private equity Business Angels SWAIN Large accountancy practices Beer & Associates Friends, Family, Staff A 2 F

14. Equity - statistics Only 6% of private equity is invested in start-up or early stage companies Most equity is invested in more mature, larger companies Success rates with applications for funding = 1% with VCs and 5-10% with business angels So it’s not that easy to get equity funding! A 2 F

15. Expectations of funders - equity Equity investors Exit strategy - Trade sale, Management Buy Out, or Flotation in 3+ years Realistic Valuation High Returns required A 2 F

16. Equity No interest cost No security needed No repayment of capital Potential skills of investors, or strategic partner Leverage for debt Dilution of ownership ‘ Cost’ (high returns demanded) Lead time to obtain it A 2 F

17. The funding process and costs How long it takes to raise debt or equity Negotiation of terms Due diligence - lots of questions Legal documents – far more if you are raising equity Costs - manage them proactively A 2 F

18. Business plans and forecasts - getting them right Contents -10/12 pages +appendices as appropriate 2 page Executive summary Do It Yourself! - must be written by management, not by your accountant Use an accountant to help produce the financial forecasts Refer to BUSINESS LINK website for guidance Be clear on product and route to market A 2 F

19. 1:1 finance advice (telephone/clinic/site visit) Information – website & call centre 0845 600 9966 Local Business Link adviser Specialist advice – IT, Marketing, Innovation, Environmental, Skills Grant potential – LMAS, IYRE Further support from Business Link A 2 F

20. Questions ? A 2 F