Sources of Finance to micro and small businesses in a changing world. Solihull Business Club

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Sources of Finance to micro and small businesses
in a changing world.Solihull Business Club

• Dr.Steve Walker, Chief Executive, ART
• (Aston Reinvestment Trust). www.reinvest.co.uk
• 13th November 2012

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Before looking

• Current Position-profitable, finances including
  personal under control, orders?
• What is owners stake in the business?
• How much needed now and in future?
• Viability is the first key.
• Does the business owner understand the plans?
• Can evidence be provided re realism of forecasts.

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What lender/investor looks for.

• Business Plan discussions, which should
  reveal-
• Knowledge of product
• Understanding of market and evidence of demand
• How going to achieve sales
• Financial planning, systems and controls
• Credibility of people involved and enthusiasm
• Clear assumptions that make sense
• What if ? the thought-through alternatives
• To be treated as a partner before AND after the
  lending.

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There no more! R.I.P.
DTI DBERR RDAs . LSC, RDA -AWM. BUSINESS
LINK, ENTERPRISE LINK,. NEW DEAL FOR
COMMUNITIES, 3B, HALAL FUND, CITY CHALLENGE, AREA
REGENERATION INITIATIVES, NEW DEAL FOR
COMMUNITIES Even some Banks! This is just a
glimpse..
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Help to access finance-public/private

• Corporate Finance Advisors packaging
  combinations- now much more usual local examples
  Blue Sky Corporate Finance, Central Finance and
  Ludgate Finance.
• Accountants ICAEW BAS scheme, specialist
  business advice, support schemes mix
  private/public Growth Accelerator
• Public Sector Information, advice and support
  (in association with the private sector) -now
  mainly information and signposting only. Great
  CARE re accuracy Be wary of the
  websites-especially gov.uk

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Sources of Finance

• Grant /Debt/Equity
• Own money- is it borrowed? Credit Cards? Care
  where is support/help?
• Family, Fools and Friends.
• Personal Finance a whole new world..... MS
  ,Tesco, Virgin, Rate Setter, Zopa the dangerous
  sources Money shops etc.
• Grants a changing scene- keep watch for local
  schemes Where to watch?-usually local press
  and local authority web sites.
• Care time v reward. Current Birmingham Post and
  small Local Authorities /LEP based schemes.

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Sources of Finance

• Overdrafts/Loans from Banks and other lenders-
  property, fixed assets.
• Most linked to security especially the banks.
  Very little to start ups.
• New lenders-banks and non bank lending sources.

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National Government Scheme

• Enterprise Finance Guarantee Scheme
• 75 guarantee of bank borrowings between 1,000
  and 1,000,000 Decision to lend and on terms are
  with the lender. CARE each lenders terms may be
  different. Residential security cannot be used.
• Small and Medium Sized Enterprises with
  turnover up to 25 million
• Guarantee premium of 2.
• Available through Banks and some other
  lenders-substantial reduction in use.

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Some other Sources

• Factoring/Invoice Discounting- sales growth
  finance debtors- www.abfa.org.uk
• Leasing and Asset or Stock Finance-www.fla.org.uk
  
• Specialist schemes- e.g. -
• Carbon Trust-Energy Saving, -Charity
  Bank-Charity Sector , Big Society Capital
  funding SIFIs-Social Investment Finance
  Intermediaries- many others for social enterprise
  sector.
• .

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Non-Bank Funding

• For more details and a searchable list of sources
  of private and public sector finance see-
  www.betterbusinessfinance.co.uk
• www.businessfinanceforyou.co.uk
• Other Sources A-Z...Non Bank Funding peer
  groups
• e.gsBusiness Loan Network(Thin Cats) , Funding
  Circle, Zopa.

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Local Angel support.

• Support Involvementmoney
• Local Business Angel Networks
• www.abangels.com
• www.cebangels.com
• www.beerandpartners.com
• www.minerva.

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Local Equity Funds

• Early Advantage Fund
• 18 Million Fund
• Up to 250k Matched Investments (750k Total)
• Fund managed by Midven.
• Exceed Midlands Advantage Fund
• 18 Million
• Up to 750k
• Fund managed by Midven
• Advantage Creative Fund
• Up to 250k
• Creative Industry Focus
• Mercia Technology Fund
• 50k to 1 Million
• High Technology Focus
• Finance Birmingham Equity/Loan Birmingham and
  Solihull 100k up to 1million with Creative
  Equity Fund.

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CDFIs and other loan providers.

• Community Development Financial Institutions -
  West Midlands CDFIs and other loan sources
• CDFIs are Independent not for profit loan
  providers - exist to provide finance when
  traditional lenders say no - in West Midlands,
  cover the whole Region.
• Main aim is to stimulate enterprise and support
  creation and preservation of jobs.
• CDFA National Trade Association Finding
  Finance www.cdfa.org.uk.

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Additional loan providers in the West Midlands.
Community Development Finance Institutions (CDFIs ) Community Development Finance Institutions (CDFIs ) Community Development Finance Institutions (CDFIs )
Loans of up to 100,000 see www.fair-finance.net Range Location

ART(Aston Reinvestment Trust) 10k-100k Bham Solihull

BCRS Small Business Loans(Black Country Reinvestment Society) 10k-100k Black Country Staffs
Coventry Warwickshire Reinvestment Trust Up to 50k Coventry Warks.
Impetus Marches Rural Reinvestment Trust Up to 50k Marches Worcs.
Others Others Others
Finance Birmingham Loans and equity. 100k -1m Birmingham Solihull at the moment. Solihull limited to 200k loans.
Princes Trust -18-30yrs young U24 start ups. 250-5k Regionwide
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ART Lending Criteria

• Refused loan by bank and other sources.
• Viable proposition - application form/business
  plan-
• Concentration on the people and plan.
• Social and Economic Benefits to area-usually jobs
  created or preserved.
• Evidence of desire and ability to repay

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ART-Typical Terms

• ART -Small Business Loans Birmingham and
  Solihull
• For existing and start up businesses-
• 10000 to 100,000, secured and unsecured.
  Average deal size currently 25k.
• Up to 7 year loan period . Average 5 years.
• Can lend alone or as part of a package for large
  deals.
• Commercial rates of interest and fees- 12./basegt
  min 10.
• Compare banks for similar loans-times have
  changed. 15gt24
• Wide range of sectors and size of business
  supported.
• CONTACT 0121 359 2444 art_at_reinvest.co.uk
  www.reinvest.co.uk Steve Walker, Martin Edmonds
  , Andy King. See website for all latest news and
  information,

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Priorities in s.m.e. sector.

• At this stage appears to be jobs created and
  preserved with all schemes grant/debt/equity.
• Growth businesses still much sought after by all
  schemes.
• 4.7m smes in UK. 75 only one employee.
• Hardly any support for start ups.

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AROUND OUR AREA

• GB AND SOLIHULL LEP WHITE PAPER CONSULTATION-Your
  chance to input before 16/11/2012.
• GB AND SOLIHULL WEBSITE PORTAL-COMING SOON...
• WHAT IS THERE?- OUR LEP
• GRANTS- BUSINESS DEVELOPMENT LEP WIDE- 10k to
  15k BCC led LA/Chamber contacts.
• AMSCI Grant /Loan targeted to supply chains.
  Large
• (COMPETITIONS BHAM POST-ADVERTISING BOURNVILLE
  COLLEGE FOR START UPS B.Post Grants -RGF
  Scheme, ART LOANS-RGF scheme)

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What of the future?LEPs?

• LEPs still early days very little resource.
  Suspect will concentrate on larger infrastructure
  and leave the small business scene to a scrabble
  between Local Authorities, Chambers and Business
  Groups / projects - deja vu.....
• Plans and more plans and consultations etc.
• Could change with Heseltine review and pressure
  re Enterprise Zone revenue- still issues though
  re areas of operation.

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Whats changed and changing?

• The banks will continue to tighten lending
  criteria to micro and small businesses.
• Most difficult area is small start ups and early
  growth businesses.
• Money is available but more expensive-likely to
  be a package from a number of sources.
• Finance Support is the key-look around for the
  alternative sources.
• Avoid WONGA! There are many better sources!