Entrepreneur's guide to finance by We Are UMi

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BUSINESS QUARTER Special Feature

Entrepreneurâ&#x20AC;&#x2122;s guide to finance The who, what, when, where and why of investment

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Markets move fast. Markets move fast. Markets move fast. How will I keep up? How will I keep up?

The world is more complex than ever before. Which makes it incredibly challenging to stay abreast of the latest news that before. could affect your investments. Thischallenging is where our The world is more complex than ever Which makes it incredibly 900 analysts can help. Constantly monitoring the world’s markets, they provide to stay abreast of the latest news that could affect your investments. This is where our our teams the information they need to keep your portfolio on track. 900investment analysts can help.with Constantly monitoring the world’s markets, they provide The world is more complex than ever before. Which makes it incredibly challenging our investment teams with the information they need to keep your portfolio on track. to stay abreast of the latest news that could affect your investments. This is where our For some of life’s questions, you’re not alone. 900 analysts can help. Constantly monitoring the world’s markets, they provide Together can find an answer. For somewe of life’s questions, you’re not alone. our investment teams with the information they need to keep your portfolio on track. Together we can find an answer. The value of investments can fall as well as rise. For some of life’s questions, you’reoriginally not alone. You back the can amount invested. The may valuenot of get investments fall as well as rise. Together we can find an answer. You may not get back the amount originally invested.

How will I keep up?

The value of investments can fall as well as rise. You may not get back the amount originally invested.

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This document is issued by UBS Wealth Management, a business division of UBS AG which is authorised and regulated by the Financial Conduct Authority. It has been prepared solely for information purposes. We should point out that with regard to any investments mentioned, values may fall as well as rise and that exchange rates may have a similar effect. © UBS 2017. All rights reserved. This document is issued by UBS Wealth Management, a business division of UBS AG which is authorised and regulated by the Financial Conduct Authority. It has been prepared solely for information purposes. We should point out that with regard to any investments mentioned, values may fall as well as rise and that exchange rates may have a similar effect. © UBS 2017. All rights reserved.

WELCOME SPECIAL FEATURE

CONTENTS 04. BRICKS AND CLICKS Clydesdale and Yorkshire Banking Group brings it’s B brands to Birmingham . 06. HEAVEN SENT Business angel Mark Pearson discusses the highs and lows of investing. 10. KNOW YOUR OPTIONS The British Business Bank looks at both debt and equity options for entrepreneurs.

Few questions are as testing for entrepreneurs as raising finance. Where am I going to find the investment that I need to get my start-up off the ground or to scale-up my existing business into a national brand or a global exporter? No matter where in Great Britain they’re based, entrepreneurs face challenges when it comes to raising finance. Gone are the days of simply approaching their local bank or building society’s branch manager and offering their home as security – now there are myriad options available. In this BQ special feature, our commercial partners explain some those opportunities that lie open for entrepreneurs. Clydesdale and Yorkshire Banking Group reveals the benefits of bringing its digital B brand into the heart of Birmingham, combining bricks and clicks to create banking services that are fit for the 21st century. The British Business Bank is another funder that’s looking at innovative solutions – whether they’re considering debt or equity, the bank runs through some of the options for entrepreneurs, ranging from equity crowdfunding to peer-to-peer lending. Experienced investor Mark Pearson takes a look at the business angel scene and shares his top tips to help company owners to attract that all-important funding. A Co Angel Investment Service is one of the many options available from Business Finance Solutions, which also co-manages the Northern Powerhouse Investment Fund and offers start-up loans in the NorthWest of England. Across in the North East, TEDCO is working with Virgin to also offer start-up loans to entrepreneurs, alongside its investment readiness programme, Start and Grow. For those looking for ongoing funding options, the stock exchange could be an attractive route and Richard Butts, a corporate partner at law firm Ward Hadaway, shares his insight into how companies can list on the equity market. It’s crucial for entrepreneurs to consider all their options when it comes to funding their businesses and critical that they take the right advice – the BQ entrepreneurs’ guide to finance may well prove to be the first step on that journey.

Business Quarter is part of BE Group, the UK’s market leading business improvement specialists. www.be-group.co.uk

BQ, Spectrum 6, Spectrum Business Park, Seaham, SR7 7TT. www.bqlive.co.uk. As a dedicated supporter of entrepreneurship, BQ is making a real and tangible contribution to local, regional and national economic growth across the UK. We are unique in what we aim to achieve as a media brand, a brand that has established a loyal audience of high growth SMEs and leading business influencers. They wholeheartedly believe in BQ’s focus on people – those individuals that are challenging the traditional ways of doing things. They are our entrepreneurs. BQ reaches entrepreneurs and senior business executives across Scotland, the North East and Cumbria, the North West, Yorkshire, the Midlands, Wales, London and the South, in-print, online and through branded events. All contents copyright © 2017 BQ. All rights reserved. While every effort is made to ensure accuracy, no responsibility can be accepted for inaccuracies, howsoever caused. No liability can be accepted for illustrations, photographs, artwork or advertising materials while in transmission or with the publisher or their agents. All content in this BQ2 should be regarded as advertorial. All information is correct at time of going to print, December 2017.

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David Duffy (left) and Paul Reeves head of customer banking Birmingham

A bank for Birmingham’s Clydesdale and Yorkshire Banking Group chief executive officer David Duffy visits the banks new B store in Birmingham and talks to BQ

YBG is the owner of the Clydesdale Bank, Yorkshire Bank and its digital B brand, and is a bank with a long history. It was spun off from National Australia Bank at the beginning of 2016, determined to combine its strong foundation with new ideas to better serve customers and attract the next generation to bank with it. In September it marked the first phase of its expansion, opening its next generation B store in Birmingham’s city centre. As well as being a fully operational bank branch for its B and Yorkshire Bank customers, the B store is a showcase for customers to experience

CYBG’s digital innovations and a state-ofthe-art business banking centre. David Duffy, chief executive officer at CYBG, said: “Our core strategy is to support our customers’ ambitions and sustainably grow the business both in the Midlands, the North of England and Scotland, as well as selectively on a national basis. The launch of our next generation B store in Birmingham has been a hugely exciting milestone on this journey. “B continues to go from strength to strength we now have more than 100,000 B customers nationally and our Birmingham

store provides an exciting and inspiring new location to let customers experience the digital innovations we are delivering right across our business. “It also enables us to increase our small and medium-sized enterprise (SME) banking presence in one of the UK’s most vibrant regional economies.” Birmingham was a natural choice for the business as it’s a market that is growing significantly and the bank sees great potential for future opportunities. Duffy says “The number of businesses setting up in the city is twice the national

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average; it’s home to a wealth of skills across both the manufacturing and services sectors, and the tech and creative industries are emerging as a hub for top new talent. Not to mention Birmingham has been named the most investable city in the UK for the past two years. “We opened our doors on New Street just over two months ago. Since then, the response from the city has been hugely positive. We’re very pleased with how things are shaping up and there’s a great atmosphere in the store. “We’ve welcomed nearly 1,000 new customers since September and we’re proving popular with Birmingham’s younger generation. Most of our new customers are under the age of 45. After two months in Birmingham, we’ve committed to £500,000 of lending in personal loans and a further £1m in mortgage approvals. And this is just the beginning.” CYBG is also helping to fuel the growth of SMEs across the Midlands, North of England and Scotland. In 2017 the bank pledged to lend £6bn of SME lending over three years between 2017 and 2019. With over £2bn of lending committed in 2017, CYBG’s target is on track. Duffy adds “SMEs are vital to fuelling the West Midland’s economy – we are working with businesses across a number of sectors, including automotive, healthcare and transport. We want to ensure businesses have access to the right support and finance at the right times. Through our Yorkshire Bank and B brands, we have made supporting SMEs in the region a strategic priority. “The potential benefits for SMEs in the West Midlands do not stop there. Our technology is designed to drive down costs as well as eventually offering applications such as accounting, invoicing and payroll systems so entrepreneurs can spend more time getting on with business. “We’re also working hard to become part of the local community and are developing partnerships across the city. For example, we have had students from the Birmingham City University to our lab to work on branding ideas and concepts and we’ve made a conscious effort to get to know stakeholders, hosting a series of events and welcome meetings.

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“The key reason we are so optimistic about the future is the fact that we have one of the most robust and ﬂexible operating platforms in UK banking.”

“We have had a phenomenal start with B in Birmingham. It’s no surprise to us that Birmingham is booming and we will be there to support our customers and our SMEs as this city goes from strength to strength.” Duffy joined the bank in early 2016. He came to CYBG after four years with the then state-owned AIB, where he was responsible for the Irish bank’s turnaround and transformation into a modern bank. Duffy is a huge believer in technology, but he is also committed to combining technology with the best of the past. He has overseen a £350m investment programme at CYBG to deliver the bank’s digital aspirations. He says: “Technology has raised customer expectations of all industries. At CYBG, we are creating a banking service that compares favourably not just with other financial institutions but the best digital providers anywhere. “Our innovative B brand is building a new relationship with customers by bringing some of the easy-to-use technology they are familiar with from their smartphone and social media to the banking industry.” The new B store gives customers the opportunity to try out new technologies and services being developed by CYBG in Studio B, its dedicated innovation lab that opened in London in April. CYBG has created a platform called iB, which enables the bank to integrate and connect to fintech partners. It provides big data insights that help customers make better decisions and take greater control over their money. He adds: “The key reason we are so optimistic about the future is the fact that we have one of the most robust and flexible operating platforms in UK banking – that’s why B is able to do all the amazing things it can do. “At the heart of B is the intelligent use of data. By tagging transactions for our customers, we can understand more about

their spending patterns. “That might mean a customer receives a message from us on Saturday before going on the regular grocery shop to remind them of their food budget this month. Or it could mean automatically depositing a fixed amount in their savings account when the current account goes over a certain level. “In the future, it might mean helping to save money with recommendations for a cheaper energy tariff, or using biometrics of selfies to check a balance. We are still learning what will work best.” Since regaining its independence in February 2016, CYBG is pursuing a growth agenda with a full-service bank based right in the heart of the northern regional economies. It’s Duffy’s belief that CYBG is the true challenger to the five banks that still dominate this industry. With 2.8 million customers, it is large enough to offer a full service of products to personal customers and small businesses. Duffy says “With 6,500 staff embedded in their communities, we are small enough to move fast to capture new opportunities, trial emerging technologies and care about our customer needs. “Combining new technology with the best of the past will make our scale an advantage as the banking landscape changes. “But we don’t want to be a smaller version of a big bank. I believe that by investing and simplifying our organisation we can deliver better banking for customers.” n

For more information please contact Paul Reeves head of customer banking Birmingham on 07802 293 861 E: paul.reeves@cybg.com, www.cybg.com

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Heaven - Sent investment for entrepreneurs Angel investors - what do they do and how could they benefit your business? We caught up with renowned angel investor Mark Pearson to find out…

ward-winning digital entrepreneur and investor Mark Pearson is one of the most active angel and business investors in Europe. His business journey started when he founded global web-based marketing and advertising company Markco Media back in 2006. Since then, he has invested in 18 start-up businesses from across Europe including the likes of Ve, Paddle, Moteefe and Eventscase. Not only has this led to him nurturing the next generation of entrepreneurial talent but it has also led to him netting some pretty impressive yields. We caught up with him to find out why he decided to become an angel investor; what he looks for in an investment opportunity and what the benefits are to businesses who manage to secure an angel…

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“Investment is only one thing that an investor brings to the table, they also bring experience, their network and contacts.”

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What inspired you to start investing in start-up businesses? I built, ran and sold my own technology company between 2006 and 2014. I met many very smart entrepreneurs along the way with some fantastic businesses and so it made sense to invest my own capital and to help mentor and advise the founders and management teams to help them grow successful businesses. I love to surround myself with likeminded, ambitious and hardworking people. What do you look for in an investment opportunity? Firstly, I look at the entrepreneur and the management team, that is really what you are investing into. The people behind a start-up business, they are the people that are going to determine whether or not it succeeds. Secondly, I look at the business opportunity, does it have a big enough market opportunity and is it scalable globally? I like the founders I invest in to have huge ambition and vision. On the flip side, what do you think a business should look for in an angel investor? Investment is only one thing that an investor brings to the table, they also bring experience, their network and contacts. If the investor has had success in your business sector or area, even better. Also, very importantly is the individual. It always helps if it’s someone you can get on well with, do they understand and agree with your vision, business plan and way of doing business? This is vital to striking a good working relationship. Which of your investments has proven the most rewarding and why? To date I have made 17 investments, the vast majority have gone on to become successful businesses with a number of successful exits, some of my most exciting companies are currently scaling up globally and have multi-million revenues, so I’m very excited about the next few years. Investing

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“Be yourself, tell your story, outline your vision and explain why you and your business should be backed.”

gives you more rewards than just financial, being a part of a number of fast growth and successful companies is an enjoyable and rewarding journey. What lessons have you learned since becoming an angel investor? I now only invest in companies that have a product - at least a basic product - and some early stage revenues in place, as this proves to me that the founder is capable of delivering and is good at sales and marketing. Things mostly take a little longer than you expect and can cost more than you forecast, so always take that into account. How does the UK start-up scene compare to a decade ago and why is it attracting so much investment at the moment? I believe the ecosystem has really matured and angel investing has a very important

place in creating the next wave of global UK success stories, there has already been at least a first wave of technology companies being built and exited and now I see that we are in a prime position to be able to create some very successful and sizable companies as the skills, funding and most importantly the ambition is there to rival what has come out of the United States for many years. What advice would you give to an entrepreneur looking to win over an angel? Be yourself, tell your story, outline your vision and explain why you and your business should be backed. Also, be honest and persistent. Investors can be busy people, until they have given you a no, there is still a chance they will invest in you. Keep them updated on your progress, milestones and achievements. Sometimes investors like to see your progress as it gives them more confidence in you. n

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Profile

Vincent Efferoth and Lukas Passia from Noveltea, just one of the successful business to have received a Virgin Startup loan with support from Tedco

TEDCO Business Support helps 450 businesses access £3.5m Carole White, chief executive of TEDCO Business Support, explains how companies can access loans from Virgin start-up

www.tedco.org 0191 516 6102

TEDCO is one of the most-established names in start-up and early-stage business support and, in the past three years, has helped more than 450 new and existing businesses in the North East of England access the right kind of funding to get business ideas moving. The team of skilled TEDCO business advisors has the knowledge and contacts to put entrepreneurs in the frame for funding through a combination of government programmes, investment groups and private financing and support new ventures to set up and grow with the capital to succeed. TEDCO Business Support is the exclusive North East delivery partner for the Virgin StartUp programme offering governmentbacked, low-cost business loans for entrepreneurs in the UK. North East businesses are one of the biggest beneficiaries of Virgin Start-up loans with more than £3.5m received in the region over the past three years via delivery partner, TEDCO Business Support. Carole White, chief executive of TEDCO Business Support says: “Since day one of the programme, TEDCO has worked very closely with Virgin StartUp to ensure enterprising individuals in the North East have access to

financing options to take a new venture from idea to fully-functioning business. “The low-cost business loans can start from as little as £3,000 all the way up to £25,000 and the programme has proved very popular with fledgling firms operating in a number of different sectors. From funding new machinery to financing marketing campaigns or even creating bespoke IT infrastructure, access to financing can be the very lifeblood of the success of any new business. “Of course Virgin StartUp is so much more than a low-cost business loan, the added value involved with being associated with the Virgin brand can bring untold benefits to new ventures. We have had clients pitching to Sir Richard Branson, being promoted by Virgin online and invited to be part of Virgin events throughout the UK. “With the added support of our investment readiness programme, Start and Grow, TEDCO is helping to develop the business dreams of hundreds of entrepreneurs throughout the region thanks to our skilled advisors and their countless years of experience supporting new businesses to access the right finance for their business.” Start and Grow is a national programme, delivered in the North East by TEDCO, to help new businesses receive the initial one-to-one mentoring and support required to develop ideas into thriving businesses. One of the main objectives of the programme is to help businesses become investment ready by assisting entrepreneurs in their goals to access private financing. White continues: “Access to private financing has always been one of the most difficult parts of setting up a new business and can be a somewhat arduous and drawn out process for many looking to start up on their own. Through the Start and Grow programme, new businesses work directly with an assigned TEDCO business advisor who can guide individuals through the search and application process to find the most appropriate sources of funding. “Our objective is always to provide the best level of support we can for any business to ensure their enterprise can thrive and expand and that often means picking through every facet of their business plan and launch strategy to ensure they are in the right position for success.” n For more information on routes to finance for new or expanding businesses please contact TEDCO Business Support on 0191 516 6102 /www.tedco.org.

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Looking to get ahead in business? Know your ﬁnance options Entrepreneurs have lots of options when it comes to debt and equity, writes Keith Morgan.

ast month’s Budget saw the Chancellor, Philip Hammond, set out his plans for the UK economy. Right at the centre of his proposals was a big pledge to back Britain’s entrepreneurs and smaller businesses with a £2.5bn boost for the British Business Bank. For entrepreneurs and smaller businesses, so vital for the UK economy, securing extra finance is crucial to realising potential. But many business leaders are not aware of the finance options available to them and, according to the British Business Bank’s latest Small Business Finance Markets report, 71% of small firms would accept slower growth rather than borrow. This is partly because many entrepreneurs lack awareness of the increasingly diverse funding market for smaller businesses. The British Business Bank’s 2016 Finance Survey

reported that 69% of businesses seeking finance only approached one provider. Furthermore, around one in three small and medium-sized enterprises (SMEs) will cancel their plans if not offered the full amount of finance they are seeking. The British Business Bank, as the UK’s national economic development bank, is working to change these statistics. On the supply side, we design, deliver and efficiently manage programmes that make finance markets work more effectively for smaller businesses. On the demand side, we work to raise smaller business awareness of, and confidence in, the finance options available. For any entrepreneur, wherever they are on their business journey, understanding the options available is key to growth. The

bank supports the market to provide two main forms of finance to smaller businesses –equity and debt finance. Equity financing Is the raising of capital through the sale of shares in a business. Equity can be sold to third-party investors with no existing stake in the business or, alternatively, can be raised solely from existing shareholders, through a rights issue. Whether starting out or experiencing a high-growth phase, equity can help small businesses progress to the next level and access broader expertise at the same time. Below is a list of options available, ordered by typical investment size from smaller investment options more useful for entrepreneurs and start-ups, to larger options more relevant for established smaller businesses:

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Equity crowdfunding is a means to connect companies with hundreds of thousands of potential investors. This is

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achieved by matching companies with would-be angels via an internet-based platform.

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Business angels are individuals who make equity investments in businesses with growth potential, businesses in the early stages of development, or in established businesses looking for expansion capital.

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Venture capitalists invest in businesses with the potential for high returns. They want proven track records, and so rarely invest at the start-up stage, but bring a wealth of experience to the business.

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Private equity investors offer growth capital or medium to long-term investments in companies with high-growth potential. They usually try to embed operational improvements and aim to grow revenue through investment in developing product lines, new services, or expansion into new territories.

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Public listing is often the next stage of growth for a business looking to stay ahead and involves applying for a public listing of its shares.

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such as investment in plant and machinery, computers or transport.

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Peer-to-peer lending is a common debt option, whereby internet-based platforms are used to match lenders with borrowers. The UK is at the forefront of innovation in this growing form of alternative online finance.

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Asset-based finance is a collective term used to describe invoice finance (IF) and asset-based lending (when a business loan is secured by using assets as collateral). IF includes factoring and invoice discounting, which will both involve funding provided against outstanding debts.

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Merchant cash advances are unsecured advances of cash, based upon future credit and debit card sales. These are repaid via a pre-agreed percentage of a business’s card transactions.

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Bonds and mini-bonds are a way for companies to borrow money from investors in return for regular interest payments.

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“Debt does not involve relinquishing any share in ownership or control of a business.”

Debt financing In its simplest terms, is an arrangement between borrower and lender. Unlike equity, debt does not involve relinquishing any share in ownership or control of a business. However, a lender is far less likely to help a business hone its strategy or provide advice than a business angel or venture capital investor.

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Overdrafts are often what businesses use to help finance working capital and to meet short-term requirements.

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Loans, leasing or hire purchase agreements are, in most cases, better suited to larger longer-term purchases,

Growth capital loans are flexible debt finance options that are tailored to the specific risks in the business, with a repayment plan to match the forecast cash generation of the business.

Our Business Finance Guide, which we jointly publish with the Institute of Chartered Accountants in England & Wales and in partnership with 21 other business and finance organisations, outlines the funding options available to businesses at all stages, taking into consideration their future plans. Thousands of businesses are accessing this invaluable resource every month, benefiting from clear, unbiased information about the increasingly wide range of finance options available to them. n You can take the online journey at www.thebusinessﬁnanceguide.co.uk.

Miss Macaroon Miss Macaroon, set up by social entrepreneur and trained pastry chef Rosie Ginday, is a highend patisserie with a difference that accessed finance thanks to the British Business Bank’s Enterprise Finance Guarantee programme. Established in Birmingham, the social enterprise business specialises in the baking of French macaroons, which are hand-made by long-term unemployed young people, ex-offenders and care leavers aged between 18 and 35. Miss Macaroon approached BCRS Business Loans, an accredited lender for the British Business Bank’s Enterprise Finance Guarantee programme, after finding it difficult to secure finance from both social and traditional lenders. The reason for the additional finance was two-fold: Firstly; to fund an expansion into retail and secondly to act as match funding bid for a grant. Miss Macaroon’s expansion into retail has helped create jobs locally and will allow Ginday to provide more training opportunities for vulnerable young people. Ultimately, the aim is to help as many young people as possible secure sustainable, full-time employment. Ginday said: “Without this loan, I wouldn’t have been able to progress with our plans to open brand new stores and create additional employment opportunities.”

Profile

Finance solutions that make a difference A range of options are available to businesses through Business Finance Solutions, including the Northern Powerhouse Investment Fund.

info@b-f-s.org.uk , 0161 245 4977

Business Finance Solutions (BFS) was established in 2002 with a brief to provide a professional and service-focused alternative business finance option for businesses that have been unable to obtain funding through mainstream lenders. Over the years, the company has continued to grow and develop its finance offering and has now lent more than £230m to 17,000 businesses across the UK through a variety of funds, helping close the “finance gap” and helping businesses to access the finance they need to start and grow. One of these businesses is Clitheroe-based door hardware manufacturer Loxta Hardware, which secured a £50,000 investment from BFS through the £10m Northern Powerhouse Investment Fund (NPIF) which is jointly managed by BFS and the MSIF Microfinance fund. In response to increasing demand from its trade customers, which include interior designers, architects and ironmongers, Loxta will use the loan to design and manufacture high quality architectural ironmongery and door hardware across its seven product ranges, purchase additional stock and to bring new products to market. Loxta is also spearheading the company’s entrance into the export market in 2018, focusing on the European and Middle Eastern markets. Andy Nichols, a senior loan manager at BFS,

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said: “Shaun and his team at Loxta have created a great British company that is proudly designing, manufacturing and distributing all of their own products. “They came to us with a strong plan for growth, anchored to an ambitious brand extension, which we were very happy to support with funding from the NPIF and, as a result, Loxta is already well on the way to establishing a new standard of product and engineering within this market.” And it’s not just manufacturers BFS supports either; the company provides financial support to businesses from an array of sectors for all kinds of investment needs. It provides anywhere from £500 through to £500,000, which includes Start Up Loans and business growth loans. It also works with many high growth businesses to raise early stage equity of up to £2m through its Co Angel Investment Service. As the finance arm of The Growth Company and supported by the Greater Manchester Combined Authority and Greater Manchester Local Enterprise Partnership, BFS continues to work with thousands of ambitious businesses across the North West to help them to grow, thrive and create jobs. n To find out more about how BFS could help your business secure the finance and support you need, contact the team on 0161 245 4977 or email info@b-f-s.org.uk

“They came to us with a strong plan for growth, anchored to an ambitious brand extension, which we were very happy to support.”

Profile

Float to grow ASK THE EXPERT: Corporate partner and expert in flotations at Ward Hadaway, Richard Butts.

Floating on a stock market is one option for companies looking to raise investment, as Richard Butts explains.

For further information, please contact Aranda Rahbarkouhi, PR Manager 0191 204 4446, aranda.rahbarkouhi@wardhadaway.com.

Entrepreneurs who are seeking funding to achieve long-term stability and growth for their business should consider whether a flotation will achieve their goals. Recent research* reveals more than three quarters of UK entrepreneurs seeking funding for their businesses over the next 12 months are looking to raise up to £10m each. Making the decision to float your business requires careful thought and obtaining experienced advice early on is critical. If your company has a track record of profitability and the prospect of future growth, then it may be attractive to institutional investors and so a float may be suitable. Reasons to float There are a number of reasons why you might consider floating. Once your company’s shares are traded on a stock market it can issue its shares to fund growth and development. A float will create a market for your company’s shares. This allows shareholders to realise value from their investment and your company to complete acquisitions by offering shares. It may also enable you to fund research and development and permit employees to participate through owning shares with a visible value and a ready market. A float will also raise the profile of your company, which can help with customer relations and suppliers. During a flotation, an entrepreneur is usually able to sell shares in order to realise some value for their hard work, although you should not assume that a float will be your opportunity to fully exit, as investors will be looking for evidence of your continued commitment to the business. Contemplating flotation It’s also worth remembering that a flotation is not for every company. Once a company’s shares are traded on the stock exchange, it will be exposed to greater regulation and its value can be affected by market conditions beyond its control. Management will be subject to additional duties and responsibilities and they will need to have regard to the position of key institutional investors. The cost of a flotation can also be significant, particularly when compared with the cost of other funding routes. This cost needs to be taken into consideration when weighing up your options.

Of course, companies listed on the stock exchange can efficiently access further capital via issues of shares along with enjoying the other benefits that a float and life on the market will bring. If you are contemplating a flotation, the most important thing to do is to appoint an adviser that will help you decide whether a flotation is the best path to take for your business. It will then guide you through the process.

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“It’s also worth remembering that a flotation is not for every company.”

Getting the right support Once you’ve decided that a flotation is for you and your business, you’ll need the support of a stockbroker, an accountant and a lawyer. A stockbroker will be responsible for canvassing investor interest in your business and for raising capital. They can advise on the value of the company and the pricing of shares to be issued. There’s also market testing to reduce risk to consider. Your stockbroker will introduce you to institutional investors who will check out what potential value would be placed on your business if it was to float and what the appetite would be to invest in your company. Floating can involve restructuring the management team, introducing robust business controls and defining the strategic plan. Your lawyer and accountant will lead on these aspects of the process and also the legal and financial process involved in the flotation. As an expert in company flotations at Ward Hadaway with more than 20 years of experience, I’ve provided advice to many business owners looking to float. n * Research comes from The EY Fast Growth Tracker which interviewed 371 business owners and alumni from EY’s Entrepreneur of the Year programme about their fundraising and exit plans. We are holding a series of confidential consultations with businesses and stockbrokers on the benefits of floating, and so call now to book a FREE consultation early in the new year.

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Raising Finance for Growth Raising finance has never seemed so complicated but, as Craig Peterson of Growth Capital Ventures explains, it needn’t be too daunting, if you have a little help.

apital is the lifeblood of growing businesses and, at some point, most entrepreneurs have to raise funds. The prospect of having to access finance, however, is one that can daunt even the most self-confident of business people. They face a bewildering array of options, each cloaked in jargon and technical shorthand which need expensive specialists to translate. Also, some of the long-established rules no longer hold true. The 2008 banking crisis drove big changes, with demand and technology allowing new alternative finance providers to enter the market. For example, equity crowdfunding, peer-topeer lending and co-investing have become more established and accessible for the UK’s growth businesses and changing government priorities have meant significant changes in the availability and structure of business grants. On the one hand, this wider choice presents more opportunities, but, on the other, it adds further layers of complication. Should your injection of capital be in the shape of a grant, debt or equity? What about banks and crowdfunding? Where do private equity firms or a venture capitalist fit

in? Is it possible to use a combination? What makes the situation even more fraught, is that the choices you make in navigating these waters are some of the most important you face as an entrepreneur. Whether your business is a start-up or well established, accessing and structuring the right finance will have a significant impact on the speed at which your business grows and the size it eventually reaches. At Growth Capital Ventures, GCV, an FCA registered fintech company driving many of the changes in finance, we help entrepreneurs make the informed choices that will nurture future growth and we dispel the mystique that surrounds fund raising. Here’s a brief round-up of the funding sources available. In broad terms, there are three types of finance a business can aim to secure for growth: grants, debt, and equity. These can be used on their own or in combination. Grants come in a wide range, whether it’s a start-up grant or a research & development grant for an established business. They usually ultimately come from government and are therefore subject to change – even more so with Brexit - so you need to know

where to look for the most up-to-date information. The type of grant that is right for your business will depend on a number of criteria such as: the type of business; stage of growth; geographic location; and growth plan. For young businesses grant funding is extremely useful because, after all, it’s free money - isn’t it? Well, up to a point. We all know, there’s no such thing as a free lunch. In fact, grants usually come with strings attached. Applying for a grant, particularly for larger amounts, can mean jumping through hoops, just like applying for any other form of finance. Also, while the grant awarding body won’t be looking for a return on its money, it will expect other benefits, usually in the form of jobs or innovation outputs. Also, remember, if your application is successful, grant moneys aren’t paid upfront but are normally claimed during or at the end of a project, so build that into your cash flow forecast. If you can’t get a grant, there’s debt finance. Most businesses will need debt at some stage, even an overdraft. It’s important to take the right form of debt for the stage the business has reached. You shouldn’t, for example, use short-term debt, such as an overdraft, to fund long-term plans, nor should you take on long term debt to tide you over a short term cash flow problem. The main types of debt for a business are: loans and overdrafts; finance secured on assets; and fixed-income debt securities. Increasingly, there are also peer-to-peer (P2P)

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business loans and start-up loans. P2P was pioneered in the UK in 2005 and ten years later platforms have enabled lenders to provide more than £4.4bn to UK consumers and businesses. The peer2peer finance association is confident that the sector will continue to grow significantly from this base. There is tax relief on interest payments and debt finance - unlike equity – doesn’t entail giving up a stake of your business. On the other hand, it may have to be secured against an asset of the business or the owners. Equity investment, in the form of selling shares, will be the most suitable form of finance for high growth businesses, particularly startups and early stage companies. Equity finance can be raised solely from existing shareholders or from third-party investors who have no existing stake in the business. The public may also acquire equity stakes in early stage high growth companies through equity crowdfunding platforms, a significant development over recent years which allows companies seeking funding to connect with hundreds of thousands of potential investors by matching companies with

would-be investors via an internet-based platform. At GCV, we have refined and developed this with our co-investment model whereby the public buy shares in a company alongside experienced angel investors or institutions who anchor the investment. This gives suitable investors the confidence that the business has been thoroughly vetted by experienced business people and it gives the company the advantage of having access to the expertise and contacts of business angels. In my experience, for many entrepreneurs, the decision to go down an equity funding route can involve considerations beyond the purely financial because it means them giving up an element of control - and that can be a difficult adjustment. It’s a personal decision. The entrepreneur could own 100% of a business worth a £1 million or they might dilute their own equity by putting it through successive rounds of Growth Ventures financing to growCapital it and end up owning 20% of a business worth £100 million. There’s no right or wrong answer, it’s down to an individual business. Whatever form of fund raising you opt

for thorough preparation is vital. After all, you are asking people for money and, before they invest it, they will want to be sure you have a sound business. They will look at your business impartially and you must do the same, which isn’t easy if you’ve put years into building it. So, in preparing your business plan, go back to basics. Are the ambitions and plans you made when starting out still appropriate? Has the market changed? What are the challenges and what pitfalls might the future hold? Whether your business is a well established company or an early stage start-up, accessing and structuring the right finance will have a significant impact on your future growth plans. The speed at which your business grows and the scale your business reaches will be driven by a number of your decisions. The funding package; including the structure, support and advice you take will have a major impact. It’s one of the biggest decisions you will make and with an increasingly diverse supply of finance solutions available to the growth-focused business, understanding what the best funding option needs a clear understanding of what’s available so you can decide what best suits your business. Growth Capital Ventures have developed a guide which can be viewed at www. growthfunders.com/resources which is aimed at entrepreneurs who are looking to raise capital, giving a detailed overview of each option available. Confidence in pursuing the right option at the right time is the key factor in most business decisions, as such, whether you are an entrepreneur embarking on your first startup adventure or the director of a century-old family business, if you are focused on finance to unlock your growth aspirations, ensure you seek the right advice for both you and your business. n

Growth Capital Ventures

Growth Funders Visit www.growthfunders.com or call 0330 102 5525

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“For any entrepreneur, wherever they are on their business journey, understanding the options available is key to growth.”