sophisticated investors paying an agreed market rate interest set by the company. There are no personal guarantees or investor requirements to meet, no equity given away and companies remain in complete control of their business. However, they must have collateral and structures in place.
We frequently examine the banks’ growth enabler programmes, work with them on their ability to borrow on intangible assets, place clients on mentoring programmes, and of course clients can go for straightforward market rates loans. Understanding and knowledge of banks’ criteria and outlook is invaluable guidance for clients who want to go down the route of debt funding.
Knowing the pluses and minuses of crowdfunding and angel investment. These are often at the forefront of most clients’ ambitions. The TV show Dragons’ Den, in which would-be inventors pitch for business to a panel of limelight – and equity – hungry celebrities has a lot to answer for. It often sends people on a pitching frenzy, willing to give up inordinate amounts of equity for relatively modest investments. Such pitches remain a perfect route for some clients, but for others the terms are just too prohibitive for their business to truly grow. So we try to prepare them for this route, if that’s the way they want to go, fully armed with all the information necessary to protect themselves.
— Karen Holden is founder of A City Law Firm, which won Most Innovative Law Firm of the Year London 2016, and is listed in the Legal 500
For many, the investment and funding landscape is a minefield. When clients look at the vast array of options available to them and try to understand each one, they often fall back on simpler, more common mechanisms regardless of whether that option is best for them. Sadly, those that take the wrong path can very rarely get off it. Anyone starting up or expanding a growing business needs to be prepared to take the next leap by going in fully armed with all the information and options available to them. Find someone independent and free from conflict to offer this advice, because you may end up on a path which is not suitable for you. Good lawyers help clients understand the different options out there, let them make an informed choice, introduce them to the people in the market that can move them forward, and are always there to protect and support them. They advise on the initial terms, the paperwork, the risks, the options and structures. Their clients’ success is their success!
Q3 2017 Dialogue
Published on May 18, 2017