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Funding Inspiration SUPPORTED BY
Funding Inspiration
SUPPORTED BY
Access to Finance
Gaynor Dykes
Is finance really available?
3 years accountsProfitable trading recordForecast steady growth
Regular, positive cash flow
Experienced owners/managers
Personal commitment
Good credit profile
Healthy order book Demonstrable market demand
No/limited trading record
Past losses Very high growth Erratic cash flow
Unproven owners/managers
No personal risk
Blemished credit profile
Unconfirmed orders
New/unproven market
What can I do to improve my chances of success?
Preparation & Information & Knowledge
Preparation• Purpose• Amount• Timescales• Repayment Period• Stake• Security• Costs
Information• Business Plan• Up to date accounts• Financial Forecasts• Supporting Information
Knowledge• What type of finance product?• Which provider?• Terms and conditions?
C O N F I D E N C E & C R E D I B I L I T Y
What are my options?
Debt or Equity?or both??
Pros (typically)
• No surrender of shares • Known repayments and
repayment period• Quicker, simpler to arrange • Debts are tax deductible
Debt Cons• Evidence of repayment
ability• Personal and business
security required• Can be inflexible• Terms, conditions and
covenants• Risk of becoming over
geared
Pros (typically)
• Equity is risk money. • Appropriate at start-up stage
through to maturity• Equity investors can often
provide valuable expertise and contacts
• Allows flexibility to step change a business
Equity
Cons• High growth businesses only
that can provide the investor with a return
• Investors require a percentage shareholding in return for cash
• Investors may require decision making authority
• Lengthy process with extensive due diligence
• Legal and professional fees
Mez
zani
ne
•Banks•Invoice Finance•Asset Finance – HP/Lease•Trade Finance•Social Enterprise and specialist finance•Bridging Finance•Commercial Mortgages•Business Angels•Venture Capital•Private Equity•Peer Lending
Finance Options
•Small Business Loans £3,000 to £50,000•Merseyside Special Investment Fund•The North West Fund
£50,000 - £250,00 loan up to £2 million equity
•The Social Enterprise Loan Fund - up to £250,000•NW Business Angels £10,000 to £500,000•Enterprise Finance Guarantee Scheme £1,000 to £1million•Regional Growth Fund•Local initiatives •Rural Development Programme•Coalfields Fund•Technology Strategy Board etc, etc ...
Alternative Finance Options
What help can I get?
Loan?
Overdraft?
Asset Finance?
Invoice Discounting?
Venture Capital?
Business Angel?
Grant?
Bridging finance?
Enterprise Finance Guarantee?
Public Sector Finance?
Business Plan?
Cash flow £?
Management accounts?
Financial forecasts?
£ ?
£ ?
£ ?
£ ?
£ ?Private Equity?
Access To Finance – What We Do‘Matching Businesses with Finance’
www.a2fnw.co.uk
• Ensure viable Northwest based SME’s are investment ready
• Support the process of obtaining appropriate funding
UNIQUE SELLING PONTS:
• Impartial• Independent• Credible/Experienced/Knowledgable Team• Complimentary• Free to use
Access To Finance – How We Do It
www.a2fnw.co.uk
Cashflow & Accessing Finance
Turbulent Times
‘There is an increasedemphasis on accurate cashforecasting in a “cash burn”environment, and encouragementfor imaginative solutions’
Cash Management Spring 2011
A supplement to The Treasurer
Principal Sponsor RBS Group
External Risks
• Raw Material Costs
• Risk of Bad debts
• Exchange Rate Risk
• Increasing Overheads
• New legislation
Are we funding Asset Purchases and Working Capital in the right way? (at the right time?)
Funding
• Overdraft / Loan
• Invoice Finance (bad debt protection)
• Enterprise Finance Guarantee Scheme (EFG)
• NatWest Manufacturing Fund Scheme
• Asset Finance
• Capital Import Finance
• National Loan Guarantee Scheme (NLGS)
EFG Scheme
SummaryInitiative supported by the Government
Businesses with turnover less than £25M
Where there is no other security available to the bank and all other funding options have been explored
Min loan £1K – 1M. Term max 10 years
Purpose ~ funding expansion , working capital or equipment
NatWest Manufacturing Fund
• Designed to support businesses in the manufacturing sector, this initiative is supported by up to £1bn of funds.
• The fund should be used alongside the existing options of traditional finance, including Lombard and Invoice Finance, to ensure that we provide the best funding structure for our customers which can be accessed on a variable rate or at specially agreed fixed rates.
Purpose of Loan• Loans can be used virtually any purpose and include :• Business acquisitions • General capital expenditure • Working Capital
FeaturesMinimum Fixed Rate Loan amount £100,000, maximum £25m• Fixed Rates (3 or 5 year fixture periods) are available; terms must match the
fixed rate periods • Fixed Rate Loans are provided on an interest-only basis during the 1st 2
years of a fixed rate period. • Regular capital repayments may be made from the 3rd year of the facility.
Such repayment programmes must be agreed at the outset of the loan, & whilst payments may be amortised over longer periods, the commitment will only be for the initial 3 or 5 years.
• Loans must be drawn as a single advance; it is not possible to draw the loan in stages.
Bringing Back the Cash
‘Trading Internationally brings
new sources of customers & revenues.
However, it also brings specific
Financial risks that need
To be controlled’
Cash Management Spring 2011
A supplement to The Treasurer
Principal Sponsor RBS Group
Letter of Credit
• Can better use be made of Letters of credit to deliver better terms of supply and payment?
Capital Import Finance Scheme
• Developed with support of Lombard and RBS Global Transaction Services to create a one stop funding package to acquire Plant and Machinery from abroad
• Step 1 ~ After you have selected supplier of equipment Lombard issues a formal conditional offer to finance the equipment through an asset finance facility. Offer valid for 270 days to allow asset to be built , shipped and commissioned
• Step 2 ~GTS tailor short term trade finance facility (LoC structure / Import Loan)
• Step 3 ~ Once machinery imported Lombard uses agreed asset finance facility to repay GTS.
Benefits
• Working with GTS the importer, be assured of supplier payment, may have opportunity to negotiate improved terms
• GTS can help protect the interests of the importer ensuring payments are only released when contractual obligations are met
• Asset Finance agreed upfront is bridged by a LC structure rather than cash being paid out upfront
• Payment structure matched to customer needs and help manage budgets with some certainty
• End to end solution
Undisclosed
2.3M Funding Package546K Manufacturing Fund Loan
•Knowsley based Manufacturer became the first North West business to benefit from the Manufacturing Fund•The Specialist manufacturer needed the funding to help cover the costs of orders worth £2M•It secured 546K loan from the Manufacturing Fund as part of £2.3M finance package which also included finding via the EFG scheme and Invoice Finance
Undisclosed
382K Capital Import Finance
•Lombard agreed to finance new manufacturing Line against irrevocable deferred import Letter of credit•Payment against agreed milestones and sight of commissioning certificate•At final maturity date Lombard draw agreed 288K under lease agreement. Balance 94K paid by bank customer
National Loan Guarantee Scheme
Access more affordable Business Finance with the National Loan Guarantee Scheme.
What is NLGS ?
• The National Loan Guarantee Scheme (NLGS) was launched in the 2012 budget and is a Government backed bond guarantee scheme.
• By participating in NLGS banks will offer an equivalent benefit of 100bp to customers who have turnover less than £50M and are within their State Aid limits.
Who is the NLGS for ?
• NLGS is for UK Mid Corporate and SME customers who have a turnover of less than £50M and are seen to be making a material contribution to UK economic activity.
• Eligibility can include branches of foreign companies with genuine businesses in the UK.
Who is participating ?
• Scheme is available through NatWest Commercial and Business Banking and Lombard.
NatW
est
Fu
nd
s
Manufacturing Fund £1BFunding for manufacturing sectorLoans 100K – 25M yrs interest onlyFixed rate loans 3 & 5 yrs. 1% arrangement feeOption for variable rate. Standard fees to apply
UK Capital Expenditure Fund £1BLombard Scheme ~ fund acq of Business Assetswww.capex.lombard.co.ukIncludes joint initiative with GTS ~Capital Import Finance SchemeSpecialist support for import of plant and machinery
NatWest Regional Growth Fund £70MGrant support for eligible BusinessesTo support asset purchase where we cannot lend undernormal criteria Linked to Job creation/ retentionwww.bis.gov.uk/rgf
Franchise Fund £100M2 yrs Free Banking12m crhDiscounted Arr feeswww,natwest.com/franchise tel 0800 092 9117
Renewable Energy Fund £50MFund targeted at renewable energy marketManaged through the Agricultural Teamswww.Natwest.com/agriculture0800 092 9116 / Dave Furnival BDD 07818 427117
Community Business Loan Fund £5mLoans 30K – 500K ~Eligible ~ Social enterprises, Charity & Community Interest Companies200K # 1MEligible ~ Development Finance Institutionswww.natwest.com/communitybusinessloan
THE NORTH WEST FUND
Funding Inspiration Event 7th June
JULIE BROOKHEAD OF MARKETING : NORTH WEST BUSINESS FINANCE
MANAGERS OF THE NORTH WEST FUND
BACKGROUND
• The North West Fund – £185m investment fund from ERDF and EIB
• “Gap funding” focused on growing North West SMEs.
• Combines financial return with economic benefits.
• Designed to create a lasting legacy fund for reinvestment.
• Co-investment will increase fund fire power to c£400m.
• Must be invested by end 2015
FEATURES
• Supports funding requirements of growing SMEs through a range of debt and equity finance solutions.
• Improve survival of new businesses, assist key sectors in NW
• 40% for Merseyside, otherwise a broad geographic mandate.
• Wide investment range (£50k to £2m) and already matched.
• Eligibility – B2B
• Create/safeguard 14,000 jobs, generate £700m GVA (£250m by 2015) from investment into around 800 businesses.
• Establish a major, single branded NW venture capital and loan fund.
• NWBF is a holding fund, managing six experienced Fund Managers, each targeting a discrete segment of the market.
Fund Manager Initial allocation (£m)
Development Capital YFM Equity Partners 45
Venture Capital Enterprise Ventures 30
Business Loans FW Capital 35
Energy & Environmental CT Investment Partners 20
Biomedical Spark Impact 25
Digital & Creative AXM Venture Capital 15
STRUCTURE
EQUITY AND DEBT FUNDING
• Equity funding means minority stakes in our invested businesses
• Debt Funding – risk return approach
• Investment Fund with a difference – job creation targets and GVA for the region.
• Get more than just the money, we have expertise and networks
• Rigorous investment process
• ERDF and EIB support.
• Minimum of £50k
• Extended networks for next stage growth
PROGRESS TO DATE DEC 2010-APRIL 2012
• £23m has been invested into over 95 businesses (inc 18 follow-on)
• Co-investment of over £17m has been secured in support of our own investment
• Average investment is c£250k
• £6.9m of investment in Merseyside into 29 businesses
• Strong pipeline of applications currently being assessed or completed
• “Out of area” applications account for 12% by number and, in our sector funds, account for as much as 35%
• Demand for funding from established businesses being outstripped by early stage businesses
• Entrepreneurs from their 20’s to 60+ have been backed so far.
THE INVESTMENT PROCESS
• Visit www.thenorthwestfund.co.uk
• Apply online – eligibility check list and application form
• Good business plan helps progress to next stage –format on website
• The appropriate fund manager should be in touch within a week
• From assessment to decision can take from 4 weeks to 6 months - depending on circumstances.
FUNDING INSPIRATION EVENT 7TH JUNE 2012
DEBT FUNDING AND THE NORTH WEST FUND FOR BUSINESS LOANS
FW CAPITAL
FW Capital is part of the Finance Wales Group • £387 million of funds under management
FW Capital manages:• £20 million North East Growth Plus Fund • £35 million North West Fund for Business Loans
LENDING CRITERIA
Businesses • Established, growing SMEs• Must be a limited company • More than 50% of TO from B2B• Ability to debt-service from day one
Funding requirement Development/expansion capitalExamples:•Additional working capital•Stock purchases•Owner-occupier property purchases•Plant and machinery•Capital Expenditure
LENDING CRITERIA
Size of loans
Security
What do we need?
• £50k to £250k• Terms up to 5 years
• Debenture • Personal guarantees
• Realistic Business Plan• 2 years Financial projections • Evidence of bank decline
CASE: CONTROL VALVE SOLUTIONS
Situation • Fast growing company • Working capital required to meet planned and
expected growth • No security available for bank to offer extra funding
Action • Company contacted The North West Fund for Business Loans managed by FW Capital
• FW Capital undertook due diligence of customer base/sector and management team
Outcome • The North West Fund for Loans through FW Capital provided total funding package
• Customer proceeded with its growth plans • Now to take on additional workforce
PROPERTY PURCHASE
Situation • Purchase of owner-occupied business premises for £1.7m
• Customer seeks 75% LTV• Bank’s credit department agrees 65%
Action • The North West Fund for Business Loans managed by FW Capital looking to provide £170k
(10% shortfall)
Outcome • Customer is still able to purchase property despite having an initial £170k cash shortfall
WORKING CAPITAL
Situation • Growth business requires increased working capital• Bank provides increased ID line• Funding gap for up-front stock purchases
Action • The North West Fund for Business Loans through FW Capital provides £200k
Outcome • Company obtains funding to grow
ASSET PURCHASE
Situation • Business needs to purchase kit to fulfil new orders• Business has cash for usual deposit• Bank’s asset finance provider seeks larger deposit
Action • The North West Fund for Business Loans managed by FW Capital funds the increased deposit
Outcome • Customer fulfils orders thereby increasing turnover and profitability
LACK OF TRADING HISTORY
Situation • New business with 12 months’ trading history• Secures contracts with major retail chain• Requires cash to fund working capital• Bank unable to lend without longer track record
Action • The North West Fund for Business Loans through FW Capital lends against management and contracts
Outcome • Customer is supported to get to the next level of their growth
• Customer able to develop a stronger track record with the bank
THE LIVERPOOL RECRUITMENT COMPANY
Situation • Demand for company’s services growing• Growth capital required to assist with expansion
plans.
Action • Company contacted The North West Fund for Business Loans managed by FW Capital
• Identified total funding requirement • Structured loan package to suit the needs of the
primary funder, The North West Fund for Business Loans and the company
Outcome • £100k loan from The North West Fund for Business Loans through FW Capital invested alongside the primary lender
• Company raised total expansion capital required
THE FW CAPITAL TEAM ON MERSEYSIDE
Simon Berry Senior Investment Executive 0151 600 5340 Mobile 07879 691478
Carol BollandInvestment Executive0151 600 5339 Mobile 07881 958582
Stephen MolyneuxInvestment Executive0151 600 5351 Mobile 07788 314653
EQUITY INVESTMENT AND THE NORTH WEST FUND FOR DEVELOPMENT CAPITAL
FUNDING INSPIRATION EVENT - 7TH JUNE 2012
• Founded in 1982• Over £350 million of funds under management
– VCT of the year 2011 – VCT deal of the year 2011
• Offices in London, Leeds, Manchester, Bristol, Sheffield and Liverpool• Over 50 employees • Portfolio of over 200 companies• The UK’s most active equity investor in small businesses*
YFM EQUITY PARTNERS
* Source: Private Equity Insight - based on the number of deals completed between £100k and £10m in the five years to May 2011
• Equity funding is the only way to “step change” a business.
• Banks lend on certainty – assets, contracts and past performance - limiting appetite.
• Equity invests on potential, ambition and future value - hence has “no limitation”.
• Equity is more patient and more forgiving.
• You get more than “just the money”.
• Don’t think in terms of “giving up a slice of the cake”; rather think “how big can I make the cake?”
• Equity investment should be seen as a “badge of honour” and not a sign of failure.
THE CASE FOR TAKING EQUITY INVESTMENT
Looking to invest in growth• Investing in new equipment or innovation• Developing new markets or geographies• Expanding workforce• Working capital funding
Business characteristics • £1m to £20m turnover• At or near profitability• Sensible gearing levels• Capable and ambitious management teams
Two products – Mezz & Equity
THE DEVELOPMENT CAPITAL FUND - THE APPROACH
Mezz•Investment £0.25m to £1.2m per round•12% interest, up to 10% equity option•Repayment up to 7 years•Simplified legal agreement
Company•Established businesses over 5 years trading history•Cash generative and generating at least £250k net profit
THE DEVELOPMENT CAPITAL FUND – MEZZ
Equity•Equity (minority stake) and loan stock•Bespoke to company’s individual funding requirement•Investment £0.1m to £1.2m per round
Company•Profitable•Fast growing business
THE DEVELOPMENT CAPITAL FUND – EQUITY
OUR LAST FOUR INVESTMENTS
YFM EQUITY PARTNERS IN THE NORTH WEST
Deborah Heyes Simon Cleaver
Ian Waterfield
Joseph Bergin
Matthew Male
Paul Gower
Jerry Scriven Sarah Riley
Manchester T 0161 832 7603 Liverpool T 0151 600 5134
RISKS TO CONSIDER
It is in the nature of venture capital investments that considerable uncertainties exist in relation to the ability of individual Investees to establish themselves as viable businesses.
As there will normally be no ready market in the securities of the Investees such investments will be essentially illiquid and may be difficult both to value and to realise.
Any proposed investments are likely to involve an above average level of risk.
Investment through a fund in developing businesses should be regarded as long term and as carrying a significantly higher degree of risk than more conventional forms of investment.
Any interests in a fund itself will also not be readily marketable.
Past performance of YFM Equity Partners or any of its subsidiaries and employees does not provide any guarantee of future performance.
This presentation is addressed only to ‘Investment Professionals’ within the definition of Article 14 of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) Order 2001 and Article 19 (5) of the Financial Promotions Order. It is only meant for investment professionals with professional experience of the subject matter. It is issued for information purposes only and should not be construed as advice, nor does it constitute an offer and should not be relied on by any other person. It may not be copied or distributed or otherwise made available to any person without the express written consent of YFM Equity Partners Limited.
YFM Private Equity Limited (FRN :122120) and YFM Venture Finance Limited (FRN:224728) are authorised and regulated by the Financial Services Authority. They are wholly owned subsidiaries of YFM Equity Partners Limited which is part of the GLE Group of companies. YFM Equity Partners Limited is registered in England and Wales, Co No 4848599. Registered office: Saint Martins House, Chapeltown Road, Leeds LS7 4HZ.
SUMMARY
• Potentially £400m of investment capital targeted at SME growth.
• Must be invested by end 2015.
• Comprises six Fund Managers with extensive relevant experience.
• Opportunity for North West SMEs to capitalise on this funding to generate prosperity and employment.
• Can stimulate ambition to allow owners and managers the potential to step change their business.
• Building on expertise that already exists to create an enduring legacy.
• The North West Fund is inspiring entrepreneurs.
• We are looking to inspire more.
Funding Inspiration Master Class
2nd July 2012
Liverpool Chamber
Through special application and assessment only through these taster events, please take an application form or apply on line at www.a2fnw.co.uk
SUPPORTED BY
Funding Inspiration Master Class2nd July – Liverpool Chamber of
Commerce• How to attract a lender or an investor • How to make a strong case for funding• How to produce a credible and readable business plan• Preparing and presenting your financial information.• Understanding legal terms and conditions of funding.
• Free
SUPPORTED BY
