FUNDING STRATEGIES

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FUNDING STRATEGIES TACTICS

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FUNDING STRATEGIES TACTICS

• TWO BASIC TYPES -
• EQUITY
• DEBT

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EQUITY FUNDING

• Friends family
• Traditional Business Angel networks (i.e. via
  Business Link/NBAN)
• Larger Business Angels and syndicates (i.e. Beer
  Partners)
• Venture Capital Trusts
• Venture Capitalists

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Equity WHAT IS A BUSINESS ANGEL?

• A Private Individual
• Not Wealthy but must have loseable capital
• Adds skills, contacts expertise
• Often non-exec
• Small/Early Stage companies that need practical
  help

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Equity - WHAT BUSINESSES ARE SUITABLE?

• Not life-style businesses
• Believable management team
• Good growth prospects
• Market and USP
• Willingness to accept dilution
• Willingness to listen
• Realistic exit

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Equity - WHAT DO ANGELS LOOK FOR?

• Sector they know
• Geography
• Fear v greed
• Leverage other sources of finance
• Potential returns, usually on exit
• Sensible returns for management
• Regular income/part-time role?

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Equity - WHAT DO ANGELS LOOK FOR? (2)

• Suitable Shareholders Agreement
• Due diligence
• EIS status
• Regular information
• Exit after 2 to 5 years

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Equity THE DEAL ANGELS WANT TO NEGOTIATE

• Equity As much as they can
• Controls over spending
• Ratchets both ways
• Gearing with loans

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Equity WHAT TO WATCH OUT FOR WITH ANGELS

• Does the Investor really have the money?
• Is he trying to pinch the business?
• Is he looking for a job?

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DEBT FUNDING

• Friends Family
• Banks
• Finance companies

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Debt - BANKS

• Overdraft
• Term loan
• SFLGS (with DTi)

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Debt SMALL FIRMS LOAN GUARANTEE SCHEME (SFLG)

• Available to start-ups 5,000-100,000,
• 250,000 after 2 yrs
• DTi guarantees 75 of loan
• Shareholders must be short of funds
• Some businesses excluded, most qualify
• Difficult to obtain direct from banks
• Mainly obtained through brokers

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Debt FINANCE COMPANIES

• Factoring (Invoice Discounting)
• Leasing (Asset Finance)
• Trade Finance

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Debt FACTORING

• Often available to start-ups
• Funds against invoices
• Typically 80 of invoice value
• Remaining 20 (less charges) when customer pays
• Costs typically base 3 plus service charge
  0.5-1

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Debt - LEASING

• Machinery and equipment
• Hardware/software
• Length typically 1-10 years

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Debt TRADE FINANCE

• Often available to start-ups
• Funds against confirmed orders
• Typically 75 of order value
• Remaining 25 less charges when customer pays

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BUSINESS PLAN LANGUAGE

• Basically on plan - (a revenue shortfall of
  25)
• Somewhat below plan - (budget missed by 95)
• Control could be available - (the business is
  going under)
• Too early to tell - (the results so far, are
  grim)
• Window of opportunity - (without immediate
  funds the business is dead)

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Thank you for listening!MY CONTACT DETAILS

• John Courtney
• Strategy Consulting Limited
• 21 Dapps Hill, Keynsham
• Bristol BS31 1ES
• Tel - 0117 9078034
• E john_at_strategyconsultinglimited.co.uk
• W www.strategyconsultinglimited.co.uk