Members News
Jargon busting for SMEs
By Angus Dent, CEO, ArchOver
The varied funding structures used by new companies can be a bewildering topic for the uninitiated, not least because they are mired in financial jargon. Let’s cut through the jargon and take a look at the key concepts. When any company is created, or in its early stages, it is described as a startup. They are often not profitable or even generating revenue. Thus, they desperately require a financial lifeline to help navigate through this formative period. This seed capital, as it is known, is usually equity rather than debt and allows startups to invest in areas such as product development and general operations. It is hard to come by from traditional funders such as banks, or venture capitalists, as it considered a very high risk investment, so startup directors must often look to friends, family and their own savings. It is also likely that some angel investors (like TV’s dragons) will be interested in investing at this very early stage.
Latterly, crowdfunding platforms have also offered funding. If the startup moves forward, the business may then be in a position to launch a new round of funding. This is likely be referred to as a Series A funding round and may be followed by a Series B, C, D and so on. These are sometimes termed alphabet rounds. These will usually be for a stake in the business, though some businesses may offer debt instead if their balance sheets are robust and directors do not want to dilute their ownership. Unlike the initial round, the business will now likely be able to attract institutional investment from venture capitalists to stabilise them over the medium-term. Venture capitalists invest through a business, rather than as
individuals or part of a syndicate as angel investors do, and also tend to offer larger amounts than angels. They will likewise offer a growing business support and contacts to help them, but will generally take a more active role in its running and require a seat on the board. Companies with more robust balance sheets will now be in a position to seek out senior debt in the form of loans secured against assets of the business. Senior debtholders are those that are most likely to be repaid in the event that a business gets into financial difficulty. Gaining a loan from a bank at this this stage of development is notoriously difficult however. As such, businesses are increasingly turning to newer sources of finance, such as
marketplace lending platforms, to provide them with the credit lines they need. Others businesses that lack assets against which to secure debt, or the stable cash flows to service it, may look to invoice financing to improve their cash flow. Invoice financing can be split into discounting and factoring, both of which involve the third party finance provider advancing the money owed to a business by its customers, minus a service fee. These types of funding will suffice to meet the business requirements of many companies, allowing for growth while keeping ownership in private hands. The next step, if the company chooses, is to go public with anIPO (Initial Public Offering).
Pirbright Tony’s sausage is best in Surrey The Surrey committee of the Royal Agricultural Benevolent Institution (R.A.B.I), organised a competition to find the best sausage in Surrey and veteran Tony - who has been a butcher in Pirbright for 60 years - won out at the charity’s dinner at the Wotton House Hotel in Dorking. Tony said: “I was a bit surprised, but my dad, who was also a butcher, always made good sausages. He told me ‘if you make good sausages, you’ll make a good business’. “The secret is high quality meat and natural skins, along with seasoning such as sage, thyme, salt and pepper.”
About 170 guests attended the Dorking dinner, where they sampled and voted for their favourite locally produced sausage from the shortlisted finalists. The Surrey committee of R.A.B.I originally asked local butchers to create a sausage recipe based on their interpretation of ‘the flavours of Surrey’ and 10 butchers signed up to compete.
Members of Beare Green Young Farmers Club served drinks and waited on guests and the night raised more than £15,000 for R.A.B.I, farming’s oldest welfare charity. MC Tim Kenny kept proceedings flowing and R.A.B.I trustee Malcolm Thomas spoke to diners about the work the charity is doing to help those in financial
need in the farming world. John and Georgina Emerson, who suffered during the Foot and Mouth crisis, gave a personal account of how R.A.B.I helped them, while TV presenter and vet Steve Leonard entertained everyone with stories about his career, including ‘the top 10 ways to die at the hands of a wild animal’.
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