Finance in Cornwall 2014 Segment 2 'Developed Business'

Scott Bentley - Partner

Funding and Support for SMEs

“Developed businesses”

www.francisclark.co.uk

Structure of morning

• Background and Grants intro (8.30am to 9.35am)

• SME, LEP, Cornwall EU millions and the ‘funding gap’

• Grant schemes (Overview)• Video from Matthew Hancock (Minister for

Skills and Enterprise)

• Grants, debt, equity and business support – stratified by size* (9.55 am to 11.00 am)

• Banks, alternative sources of finance and business support (11.20 am to 12.25pm)

• Q&A one to one / Networking (12.25pm to 1.45pm)


Funding and Support for SMEs (>£100k)

• 6 to 8 minute presentations on:• Assisted Asset Purchase (grant)• SW Loan Fund (debt)• Santander (debt/ mezzanine)• Business Growth Fund (equity)• Westbridge Capital (equity)• Folk 2 Folk (Peer to Peer)• Various

• Case Study• Q&A

Regional Growth Fund/Assisted Asset Purchase

Bruce Pedrick

Relationship Director


Overview

Benefits for Business

Key Features

Eligibility

Exclusions

Examples

Summary and next steps

5


Assisted Asset Purchase is part of the larger £2.6B Regional Growth Fund

Lloyds Bank has initially been allocated £25M (to be drawn by April 15)

Non repayable grants – subject to eligibility criteria and agreed job targets

Create long term growth and sustainable employment

Encourage private sector investment

Simple application process

6

Overview

Regional Growth Fund/Assisted Asset PurchaseBenefits To Business

• Enables an asset purchase (where businesses currently lack deposit)• Grants from £5,000 up to £500,000• Up to 20% of the asset cost for small enterprises (up to 50 FTE and less

than 10M Euro T/O)• Up to 10% of the asset cost for medium enterprises (up to 250 FTE and

less than 50M Euro T/O)• Amount of grant will be minimum amount required to enable us to lend on

normal lending terms eg stand alone loan required towards premises purchase where bank may traditionally lend 70% loan to value but purchaser has only 15% deposit, therefore max. grant 15%

• Remaining funding via HP / Loan (Min £100,000) facility


Key Features

• Create / protect 1 job for every £15,000 grant received• Independent accountant to verify within 30 months after drawdown or 6

months after job target achieved• Grant is taxable income and classed as state aid• Unable to link in any other forms of state aid.• Remaining loan/HP requirement must meet normal lending criteria• Asset must be located in England (in an area outside London)


Eligibility

• You need finance but lack the sufficient deposit• Able to commit to creating / protecting jobs for a min 12 month period• An SME (as defined earlier)• No other state aid supporting purchase• Business not in financial difficulty and new loan/HP requirements meets

usual bank lending criteria


Exclusions

• Property investment / development – property purchases are eligible if property is for own use and held on Co Bal Sheet

• Air transport equipment• Road freight transport for hire or reward – eligible if eg vehicle for a wholesaler who does their own

deliveries

• Fishery & Aquaculture• Primary production of Agriculture products• Coal• Export Related Activities – case by case


Retailer – £195K RGF and £600K loan towards purchase of additional retail premises for expansion – KIV property must be for own use and held on Co Bal Sheet

Building Contractors - £145K RGF grant and £600K loan towards purchase of new offices

Tourism - £95K RGF grant and £380K loan towards assets to be used in refurb of bar/restaurant/catering area and a small renewable energy scheme

Restaurant - £150K RGF grant and £450K loan to purchase their freehold premises

Manufacturing - £110K RGF grant plus loan of £385k to acquire a new R&D factory/ warehouse towards purchase price of £590K

11

Recent Examples


Summary and next steps

• Support SMEs with asset purchases that may have been discounted• Bring forward growth plans and create/protect jobs

• Speak to Francis Clark or your Relationship Manager/Director

Mike Wall

The South West Loans Fund

Finance for growing SMEs in Cornwall£50,000 to £250,000


FC Fund Managers has been responsible for investing and managing the larger loan element of this £12m Fund into Cornwall and South

West England

• finance allocated to the rest of the South West has already been invested• there is SOME availability left in Cornwall

• loans from the Fund fit a growth businesses which cannot source all (or any) of its finance requirements from traditional sources

• loans for most legitimate purposes can be considered• repayment terms up to 5 years; fixed interest rate; early redemption

without penalty• Application is through a secure portal at www.fcfundmanagers.com

• The team can also be reached at 01872 272288

http://www.fcfundmanagers.com/


However there is very little left in the pot, so if you are a company which is:

• ambitious• wanting to grow your sales, profit and jobs

• located in Cornwall (or about to be)• constrained from achieving your goals through limited finance

• and you have a great business!

Make contact now, or very soon - don’t leave it on the back burner…

Private Equity or Loan Investments

Private Investments

FC Fund Managers may also be interested in private equity or loan investment opportunities in its own right

• not subject to European or UK “fund eligibility” rules• is there an opportunity to make money?

• turnaround or distressed situations can be considered• short or medium term investments can be considered

• do you have a lucrative project but are held back from making it happen by a lack of finance and/or connectivity?

• If so pick up the phone to 01872 272288 or message through the website www.fcfundmanagers.com

http://www.fcfundmanagers.com/

SANTANDER GROWTH CAPITAL

Paul Chadney

GROWTH CAPITAL FILLS THE FUNDING GAPas identified in the Rowland Report

OUR BROAD CRITERIA – WHAT ARE WE LOOKING FOR?

Annual turnover £0.5m – £25m

Demonstrable Growth in a combination of sales and / or profits

Track record of operating profitability and cash generation

Proven management teams with ambition

Privately owned businesses rather than Private Equity backed

Not start-ups.At least 3 years of financial history

AREAS WHERE GROWTH CAPITAL SUITABLE

Capex investment to support growth plans

Investment in New Product Development

Investment in sales & marketing overhead for new products / areas

Acquisition funding support

Funding of proven roll-out concept

Expansion projects to drive rapid growth

OUR GROWTH CAPITAL PROVIDES KEY BENEFITS TO SMEs

Debt offering - No warrants and no dilution of equity

Preserves cash - Interest only. Cash interest is L+5%. Rolled interest of 5%

Enhanced debt capacity - Cash flow lend not limited to tangible security

No prepayment penalty fees -Provides flexibility on term

Full banking and security - No automatic requirement for PGs

Access to Breakthrough programme - Additional support

BREAKTHROUGH PROGRAMME – NOT JUST FUNDING

The Breakthrough programme will invest £200 million in fast-growth SMEs, supporting local enterprise and community initiatives, creating jobs, inspiring entrepreneurs of the future and turbo-boosting a private sector led economy

This initiative will help SMEs participating in the Breakthrough programme to reach new overseas markets if their growth plans and ambitions are beyond the UK. It includes subsidised trade missions, educational roadshows and support accessing information on exporting.

Santander is running a unique experience programme for fast-growth SMEs that takes them behind the doors of the world’s most iconic and best fast-growth businesses, to learn first hand how they did it – real experience to help their own growth journey.

In keeping with our focus on responsible business, Santander has launched a number of initiatives to encourage more responsible and inclusive business practice and to invest in Social Enterprise development.

Santander is running regional Breakthrough Live conferences for fast-growth SMEs. Working with Santander Universities the Breakthrough Live conferences bring together leading entrepreneurs to share experiences.

Santander has launched an online portal for SMEs participating in the Breakthrough investment programme to access the best student and graduate talent across our partner University network – including Universities in Scotland.

Santander has up to £200 million to invest in fast-growth SMEs turning over between £500k – £25m across the UK. The investment programme will run over the next 3 – 5 years and invest in up to 200 SMEs.

1. Breakthrough Growth Capital

4. Breakthrough Talent

2. Breakthrough Live

5. Breakthrough Responsibly

3. Breakthrough Masterclasses

6. Breakthrough International

www.santanderbreakthrough.co.uk

Communications Technology Completed July 2012 £1m Growth capital loan 10 new jobs

Vet Practices Completed July 2012 £1.25m Growth capital loan 120 new jobs

Engineering Completed September 2012 £0.4m Growth capital loan 20 new jobs

Legal Services Completed January 2013 £1.1m Growth capital 20 new jobs

Software Completed January 2013 £0.5m Growth capital loan 6 new jobs

Healthy Fast Food chain Completed March 2013 £1.25m Growth capital loan 150 new jobs

Telecommunications Completed March 2013 £1m Growth capital loan 50 new jobs

Software Completed March 2013 £0.5m Growth capital loan 14 new jobs

Software as a service (SaaS) Completed April 2013 £0.5m Growth capital loan 14 new jobs

Thai restaurant chain Completed September 2012 £2.4m Growth capital loan 90 new jobs

Healthy Fast Food chain Completed May 2013 £0.7m Growth capital loan 50 new jobs

Media services provider Completed April 2013 £0.7m Growth capital loan 15 new jobs

Cleaning products Completed September 2012 £0.85m Growth capital loan 5 new jobs

Women’s clothing e-tailer Completed September 2013 £0.7m Growth Capital loan 30 new jobs

SOME OF OUR GROWTH CAPITAL INVESTMENTS

http://www.yourvets.co.uk/

http://www.ridgwayeng.com/index.php

http://www.ilikemusic.com/

THANKYOU

……a bank for your ideas!

Growth Capital Investors

Introduction to BGF.

Ned Dorbin, Investment Director13 May 2014


Who we are. BGF is an investment firm

that provides growth capital of £2m - £10m to UK businesses with turnover of £5m - £100m. Funding for growth and equity release

Acquisitions, working capital, R&D, capital investment, overseas expansion, balance sheet etc

Investment of £2m – £10m for a minority stake

Long-term and patient capital, no forced exit

Access to huge network and support

Fast and focused investment process


Selection of our investments so far – portfolio of 53 companies….and growing!

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=hc5scSyd0SAVAM&tbnid=D87vDtgIdVtMkM:&ved=0CAUQjRw&url=http://thedigitalsawards.com/sponsors&ei=eNumUvToFOaz0QWA4YDwBA&bvm=bv.57799294,d.ZG4&psig=AFQjCNFgtwLDGu5q9oSZuzQBkXOjEG6wnA&ust=1386753250740292

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=wTSSKg9drJbx1M&tbnid=vuHWHzaX2O-HhM:&ved=0CAUQjRw&url=http://www.namtec.co.uk/supplier-directory/vtl-group&ei=V5dJUviQMMeihge8pIDoCQ&bvm=bv.53217764,d.ZG4&psig=AFQjCNGsO-8B1kaoQmn1mBRio94NcgBPnA&ust=1380640981441792

http://www.sub10systems.com/


Investment of £2m-£10mCash-in: to support long term growthCash-out: for existing shareholders

Equity stake of up to 40% Always a minority partner – you retain control

Flexible structures – equity / loan notes

Meets the needs of the company and shareholder

No closed fund pressures Patient capital. No drag rights, no forced exit

Fair legal approach Less onerous investor legal protectionsFast and focused

investment process Minimises disruption and fees

More than money Access to impressive network and support

What we can offer. Working alongside the banks, BGF provides growth capital in a way that meets companies’ needs.


South West andSouth Wales

James AustinInvestment Director

07872 819093

Ned DorbinInvestment Director

07800 682195

Alex GarfittInvestment Manager

07770 582021

Paul OldhamRegional Director

07887 657697

Edwin DaviesInvestment Manager

07880 384983

Greg NormanInvestment Manager

07557 747302

WestBridge CapitalPrivate Equity

British Private Equity Awards Small Buyout House of the year nominee 2012Guy Davies

Who is here today

British Private Equity Awards Small Buyout House of the year nominee 2012

Agenda

1.Who we are

2.What we do

3.Example : Aero Stanrew

4.WestBridge 100 club

5.Summary

Who we are• Private equity investor with offices in the South West and South

East

• Have completed 3 out of our four most recent deals in the South

West – Two more at an advanced stage

• Our money comes from pension funds, institutional investors and

the WestBridge 100 club

• We own our business and invest significant amounts of our money

in the businesses we support

• We have a top track record

What we do• Partner with management teams to acquired businesses worth

between £5m and £15m

• Support these management teams with our experience to grow our

company’s so the are worth between £15m to £50m

• Provide development capital along the way if needed

• Seek an exit at a mutually acceptable time to release value for all

shareholders

Example: Aero Stanrew

Aerospace and Defence business of the year

South West business of the year

Example: Aero Stanrew

• Supported management buy-out in January 2012• Target £50 million value in 5 years• Leader in its tightly defined niche• Exceptional management team

39

2011 20162012 2013 2014 2015

£8.5m

£30m to £35m

Target £50m

Values

WestBridge 100 club• Successful businessmen who want to invest in businesses that

meet the WestBridge quality threshold and have undergone

rigorous due diligence

• We work with these individuals to provide new business leads and

introductions to accelerate growth of investee companies

• Investors can earn

• An attractive interest rate on c 90% of their investment

• A tax free capital gain (EIS)

• Target 3x money multiple.

Summary• Private equity can be used to develop growing companies

• Suitable for established profitable companies

• Usually a change of ownership involved

• Private equity can add value

• Experience to support teams meet growth challenges

• Additional funds

• Business leads and introductions

B Y D A V I D B R O W N

Alternative FundingA Market Place to bring lenders &

borrowers togetherVaried concepts across increasing number

of Companies and PlatformsBusiness loans now available

PEER TO PEER/CROWDSOURCING DEBT

Began in 2005 with Zopa121% sector growth in 2013

£1.2Billion cumulative LendingNow Regulated by FCA from April 2014UK has most advanced website platforms

Folk2Folk 6th largest in UK

PEER-TO-PEER LENDING SECTOR

http://www.zopa.com/

https://www.fundingcircle.com/

http://www.ratesetter.com/

P2P Companies match creditworthy borrowers with investors looking for

competitive returns Loans posted onto website and auction the

right to participate in LoansSubscribed by multiple lenders, loan

executed once sum raisedWebsite based platforms with varied

models used in assessing Loans

HOW IT WORKS

Secured Lending onlySpeed of decision makingAuction letters of credit

Local knowledgeFace2Face in addition to online proposition

FOLK2FOLK IN THE SOUTH WEST

Set up by the owners of Parnalls Solicitors in Launceston

Financial and Legal sector professionalsLocal expertiseQuick decisionsPersonal touch

BACKGROUND

Alternative option for their savingsAttractive returns

Secured loansSpreading risk

Investing in the South West economy

LENDERS BENEFITS

Fast Local decisionAny purposeInterest Only

Flexible

BORROWERS BENEFITS

SECTORS

43%

8%

20%

15%

7%

6%

Property Build/PurchasesRenewablesCommercial DevelopmentAgricultureLeisureOther

Funding and support round up

Nicky CornishCorporate/ Corporate Finance


Grants, Debt, Equity and Support

• Superfast Cornwall Fund- RGF funded

- £1,000 to £50,000 grant towards 50% of project costs

- SME looking to invest in “innovative technologies or activities that require the use of superfast broadband”

- Cornwall and Isles of Scilly

• Superfast Business Cornwall - ERDF Funded

- Grant + Support + Contacts

- SME

- Transformational project; superfast enabled

- Cornwall and Isles of Scilly



Cornwall Development Company administered

• Business Investment in Growth (“BIG”) Voucher Scheme

Grants of £1,000 up to £50k

Match funding

“step change” expenditure

High growth businesses

Average £9k / job created

Convergence

http://www.francisclark.co.uk/blog/general/business-investment-for-growth-voucher-scheme






Cornwall Development Company administered (ERDF)

• Business Innovation FundGrants from £1,000 to £50,000 for 50% of project cost

“Projects at any stage of development process for new and existing products and services”

“Project has to involve buying in specialist services from CUC universities, colleges and other Higher Education Institutions (HEIs), Intellectual Property solicitors, Market Research agencies, Process, Manufacturing or Product Design specialists”

ERDF European Funding eligibility applies.

http://www.francisclark.co.uk/news-views/blog/bif-bang-innovation-fund-for-smes-live-in-cornwall/




Previously known as “Grant for R&D”

Science, Engineering and Technology: New Products and Services

Grant support for SMEs:

• Proof of market (9 months, £25k, 60%)

• Proof on concept (18 months, £100k, 60%)

• Development of prototype (2 years, £250k, 35% / 45%)

Competitive / Batch Applications

Smart v R&D Tax Credits - cannot have both for same project


SMART

http://www.robothespian.com/blog/news-blog.html



• SMEs and Large Companies

• Part fund R&D Projects: eligible costs incl staff salaries, materials, equipment etc

• Grants £25k to £150k

• Development of new or improved products, technologies, processes or services

• Job creation and/ or safeguarding

• All funding to be issued by 30/4/15

• Application deadline 23rd May. Start with ROI form

• www.innovation4growth.co.uk

Innovation 4 Growth

http://www.innovation4growth.co.uk/



Other schemes• European Fisheries Fund

FLAG – Fishing businesses & Fishing communities Axis 2 – Fish Processing

• FITs, RHI etc.



Others

• Energy Efficiency Financing SchemeSiemens Financial Services and Carbon Trust

Business trading > 36 months

Investment in energy efficient equipment (and renewable energy generation?)

Loan e.g., Interest rate c 9% for a 7 year term loan repayable in monthly instalments.

• ReEnergise SmartEnergy FinanceInvestment in renewable energy and energy efficient projects

£5m fund

SMEs – loans of £25k to £250k on commercial terms

Target sectors incl manufacturing, leisure and hospitality



SWIG (RGF)

• Available to most sectors, including those ineligible for European Funding

• Maximum loan amount £100,000 (average £30,000). Minimum loan amount £10,000

• Maximum term 5 years. 10% fixed annual interest rate

• Businesses must demonstrate investment will create or safeguard jobs

• Available to start up and existing businesses



Inspiras (Round 1 closed but further rounds anticipated)

• Open to private, public or voluntary sector organisations in Devon, Cornwall, Somerset and the Isles of Scilly

• Short-term loans of between £100,000 and £250,000, typically repayable over 3 years

• Support the implementation of innovative projects which could potentially have a significant impact on the local (SW) economy

Jobs

Innovation

Environmental legacy

• No set intervention rate but expectation this will not exceed 75%

• Business Plans to have been reviewed by professional

• Gap funding


Grants, Debt, Equity and support

Routes to Equity

• “Friends, Families and Fools” Include related businesses?

• Networks e.g., SWAIN,

• Conduits e.g., UEC Enterprises, GAIN?

• Virtual Networks e.g., Crowdcube

• Venture capitalists and Private Equity e.g., Business Growth Fund and Westbridge Capital

• Paul Saunders• Group Finance Director

• Previously worked on a large Grant claim for a Cornish Co + the Welsh Development Agency

• Established in 1988 • 6 Leasehold sites across Walker Lines Ind Est,

Bodmin• £15m t/o. Producing 25m pasties, sausage

rolls and savoury slices.• 183 staff

• Acquired freehold of the Fitzgerald Lighting Factory from Administrators in 2009.

• Forecasted savings of £500k pa• Potential audit weaknesses – jeopardise

listings.• Uncompetitive – jobs at risk

• 1st Attempt – November 2010.• Convergence Programme• £800k Grant.• Deferred due to Financial Weakness• “On the Radar”

• PS appointed March 2012.• Fresh Review of Grant availability• Dave Bullen & Richard Wadman (FC)• Lobbying continued

• 2nd Attempt – April 2012.• Rural Economy Grant (REG)• Unlock significant rural economic growth.• £1m application watered down to £150k –

“small print”• Deadline 30th April!

• 3rd Attempt – May 2012. “In it to win it”• Regional Growth Fund (RGF)• Deliver significant job safeguarding &

creation.• Expression of Interest (8 pages) by 18 June.

Outline plan of project spend & finance.• Create 50 new jobs = £1.5m towards £3.75m

project

• On 20 July 2012 invited to complete full application – Deadline 10th September 2012

• Full Formal Application = 7 pages• Guidance Notes = 27 pages!• A4 Binder to include: Business Plan (13 pgs)/Audited

accounts/ 2 yr Forecasts/Elements of Project cost/Funding structure/Market Research/CV’s/Co Policies/Independent Report/SWOT

• Assisted by Rubina Khan @ CDC

• SCRUTINY!! – 2 months• Very constructive approach from David Furse

@ CDC• Prep for Panel• Project over run/contingency/non essential

aspects of project/job creation/ business growth/funding

• Agreed by Panel on 13th November 2012 and a conditional offer sent 5th December 2012 – 6 months since Expression of Interest

• Completion of the prescriptive procurement process – involving tendering/defray by March 2015

• Evidence of all Funding• Legal Charge• “Claw back”

• DESPAIR – Despite grant award & obvious savings and efficiency gains.

• January 2013 - Clydesdale Bank decided against providing matched funding.

• Beauty parade• Changed to Santander in July 2013• Commenced build in October 2013

• PRACTICAL ISSUES.• Bridging quarterly grant claims – impacts on

cash flow.• Procurement process of tender/expressions

of interest/scoring/selecting/contracts – takes time

• I WOULD DO IT AGAIN• PERSEVERANCE = GAME CHANGER FOR US

Scott Bentley - Partner

QUESTIONS

AND

ANSWERS?

10.55am to 11am


What happens next?

• 11.20 am to 12.25 am – “Of general interest”• Banks• Alternatives • Business support: national and regional

• 12.25 pm – Networking• Coffee• One to one Q&A• Introductions/ set up meetings?


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Finance in Cornwall 2014 Segment 2 'Developed Business'

Economy & Finance

Transcript of Finance in Cornwall 2014 Segment 2 'Developed Business'