Sources of Finance for Creative Businesses

1
Sources of Finance for Creative Businesses
31st March 2006

• Jason Ball
• Investment Executive - London Seed Capital

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SOURCES OF FUNDING COVERED

• Grants
• SFLGS
• Asset Finance
• Local Enterprise Support
• Regionally Focused VCs
• Young Entrepreneurs
• Seed Technology and Arts
• Business Angels
• Other Specialist VCs

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GRANTS

• London Innovation part of the London
  Development Agency
• Lists a number of grant funding sources available
  in London
• DTI RD Grant Four levels, from
• Micro projects, grant of up to 20k
• to Exceptional projects (involving high-cost
  technology development, larger firms), up to
  500k
• EU various grants and loans
• Further Info
• www.grantfinder.co.uk www.businesslink4london.com
  
• www.sbs.gov.uk www.dti.gov.uk/r-d
• www.london-innovation.org.uk/ www.creativelondon.
  org.uk
• www.londonchamber.co.uk/europe

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SFLGS

• Start-up businesses often have few assets to use
  as collateral so hard to obtain loans
• Under SFLGS the Government guarantees the loan
• 21 lenders including all high street banks
• 75 guarantee, no personal
• Guarantee loans of up to 250,000
• Term up to 10 years
• Availability to qualifying businesses with
  turnover up to 5.6m and age up to 5 years old
• Further info www.dti.gov.uk/sflg

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ASSET FINANCING

• Outstanding invoices often an SMEs biggest
  asset.

Two ways to exploit COMMERCIAL invoices
(1) Factoring and (2) Invoice Discounting
(1) Factoring suited to smaller firms (below 1m
turnover).

• Factor controls SMEs sales ledger, providing
  credit collection and control. Pays 80-90 of
  invoice within 24hrs
• Invoices are sent to and assigned to the factor
• Factor pays the balance (less charges) when the
  invoice has been paid

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ASSET FINANCING
(2) Invoice discounting suited to larger firms

• Same as Factoring, with two important
  differences
• Collection responsibility remains with the SME
• Invoices remain assigned to the SME, not the
  invoice discounter

Both facilities involve two costs
Service charge ( sales) AND Interest Charge
Further info All major high street
banks Independent Growth Finance
www.igfgroup.com
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LOCAL ENTERPRISE SUPPORT

• Numerous organisations offer support, including
• HBV Enterprise
• Kingston Innovation Centre
• Business Link 4 London
• Portobello Business Centre
• oneLondon
• Further info
• www.hbv.org.uk www.kingstoninnovation.com
• www.pbc.co.uk www.gle.co.uk/onelondo
  n/Loans/SBLoans.htm
• www.cdfa.org.uk www.sbs.gov.uk
• www.businesslink4london.com

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LOAN FUNDS

• OneLondon 7m Loan Fund available
• Seed (e.g. 5k)
• Growth (e.g. 20k)
• Eligibility
• Objective 2 areas (East/North-East areas
  post-code specific), oneLondon and ELSBC, up to
  250k
• All other areas up to 20k standard
• Advice and mentoring support post-loan
• Further info
• www.one-london.com http//www.goeast.org/002acce
  ss.htm

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SEED TECHNOLOGY and ARTS

• University Seed Funds invest in university
  spin-out companies
• The Recycling Fund recycling companies with a
  UK focus
• Film London Film finance
• NESTA innovation, most projects 35-80k
• The Wellcome Trust (Translation Awards),
  healthcare sector
• Further info
• www.unico.org.uk www.recyclingfund.com
• www.filmlondon.org.uk www.nesta.org.uk
• www.wellcome.ac.uk

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YOUNG ENTREPRENEURS

• Shell LiveWIRE - 10,000 prize 16-30yrs
• Princes Trust
• a low interest loan (up to 4,000 for a sole
  trader, or up to 5,000 for a partnership)
• a grant of up to 1,500 in special circumstances
• a test marketing grant of up to 250
• Further info
• www.shell-livewire.org
• www.princes-trust.org.uk

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EQUITY FINANCE

• Selling a share in your business
• Various sources of equity finance
• Friends and Family
• Business Angels (private investors)
• Venture Capital
• How do these link together?

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EQUITY FINANCE DIAGRAM
CAPITAL NEEDS
Growth
IPO
High Risk
Formal Venture Capital
Business Angels
Low Risk
Friends, Family Fools
TIME
Sustained Growth
Seed
Start-up
Early Growth
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BUSINESS ANGELS
Business Angel private investor who might
invest their own money in your business. Angel
Network organisation that links suitable
businesses to its membership of Angel investors

• High Capital Returns for risks involved
• SMEs with a clear/concise Business Plan
• Minority shareholder legal protection
• Potential for explosive growth
• Involvement post investment
• Exit in medium term

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BUSINESS ANGELS

• BBAA angel network trade association
• Example Business Angel Network
• London Business Angels. Not-for-profit, 180
  investors meet 7 times p/a, invests 100k -
  750k, 33 success rate. 800 applicants p/a and
  40 selected.
• Co-investment funds invest alongside angels
• Further info
• www.bbaa.org.uk www.lbangels.co.uk
• www.londonseedcapital.com

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INVESTMENT FUNDS

• The Capital Fund up to 250k, further 250k
  possible after 6 months Greater London only
• Bridges Community Ventures 150k in companies
  based in deprived areas
• London Seed Capital 50k to 100k business angel
  co-investment fund London and South East
• GoEast Ventures 50k to 350k East London
• Creative Capital Fund 75k co-investment, up to
  500k available as follow-on funding
• Further info
• www.thecapitalfund.co.uk www.bridgesventures.com
  
• www.londonseedcapital.com www.bvca.co.uk
• www.goeastventures.co.uk www.ccfund.co.uk
  

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VENTURE CAPITALISTS

• Larger amounts of funding 1m
• Equity investors who seek a seat on the Board
• Typically invest in later stage companies
• Represented by British Venture Capital
  Organisation (BVCA)
• Members invest in all sectors of the economy
• 170 full members
• Further info
• www.bvca.co.uk

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Jason Ball
Thank you for your interest
Tel [phone] www.gle.co.uk www.londonse
edcapital.com jason.b_at_gle.co.uk