How to get appropriate finance for your business in the UK
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How to attract the right finance for your business Viktor Todorov Founder, BizDonut.com
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Transcript of How to get appropriate finance for your business in the UK
How to attract the right finance for your
business
Viktor TodorovFounder, BizDonut.com
www.bizdonut.com
Who am I?
Viktor Todorov, MBA
5 Years in Large Corporates
Supported over 50 SMEs and Startup
companies
Business Strategy
Business Modelling
Fundraising
Process Modelling
Solution Selling
Expertise
Problem Solving
Business Coach
Founder
www.bizdonut.com
Agenda 1. Key questions to consider before seeking finance2. Traditional sources of finance3. Angel Investors and VC3. Crowdfunding4. Grants
Coffee Break
6. What is a business model7. 12 important things to consider when writing a business plan8. Evidence based entrepreneurship9. Business Model Canvas10.BizDonut11. Close
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High Growth vs Lifestyle Company
A high growth business focuses on a marketplace with potential
for rapid and robust growth over the coming years.
The lifestyle business, on the other hand, is one that may or may
not see significant growth, but exists to fund the “lifestyle” of its owner
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Key questions to consider before seeking finance
How much are you looking to raise?
How long do you want the finance for?
Are you ready to offer security over a business or personal asset or guarantees?
How would you repay an overdraft or loan?
Are you prepared to bring in an outside investor and give up a steak?
What do you need the money for?
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Funding types for different stages
Break Even
Seed/Startup
Early Stage
Personal:Savings, Credit Cards, Second Mortgage, Friends & FamilyLoans MicroLoans (Startup Loans £500 – £25,000)GrantsCrowdFundingInternshipsEquity – Angel Investors
Equity CapitalAngel CapitalVenture CapitalLoans Bank LoansMicroLoansGrantsCrowdFundingInternships
Equity CapitalVenture CapitalCorporate VentureLoans Bank LoansGovernment Loans Mezzanine Funding
Grow/Expansion
Time
Growth
Later Stage/IPO
Equity CapitalVenture CapitalCorporate VentureBuying out firmsInvestment BanksLoans Bank Loans
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Debt or Equity
Equity – shares in a private or publicly quoted company
Equity finance – used to finance research & development, marketing or an acquisition
In return – investor wants dividends (out of company profits) and increase in value of shares
Debt: Loans, Overdraft, Factoring and Invoice Discounting, Hire purchase, Mortgage
In return – repayment of debt and interest
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Traditional Finance – Bank Loans
The business’ risk profile matters
Finance providers use variety of information to assess risk
Banks look at how the accounts are run, facilities repaid
The Business Plan needs to be logical with reasonable hypothesis
If the business is a startup limited company, finance providers will look at the directors’ credit history
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Traditional Finance – Bank Loans
If refused credit by a bank
Get a written explanation for the decision
Consider requesting an appeal
Bank should offer suggested alternative sources/types of finance
Review banks feedback and consider applying to another bank or sources of finance
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Newer Source of Traditional Finance
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Handelesbanken specialise in providing personalised and bespoke banking services to both corporate and individual customers. Decisions about your banking are made by your local branch. www.handelsbanken.co.uk
Metro Bank offers business overdrafts, loans and credit cards. Longer opening hours than the high street banks. www.metrobankonline.co.uk/commercial
Shawbrook Bank – all lending is done through independent brokers/strategic partners. www.shawbrook.co.uk
Aldermore – lends to SMEs through asset finance, business mortgages and invoice finance. www.aldermore.co.uk
Newer Source of Traditional Finance
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What is a Business Angel
Angel Investors are individuals investing their personal money in the equity or debt of a Early or Growth Stage Company
Often referred to as Smart Money, it is where an individual wishes to invest their time or experience as well money in a start-up company.
Angel Investing is Active Investing not Passive
The Angel could be a member of an angel network
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Business Angels – Useful Tips
The traditional Business Plan is different from a funding business plan
The investor is only interested in what he/she wants to know and
not what you want to say.
The Business Plan is not read all the way through from page 1 to 30.
The detailed sales, marketing and operations plans are as important as the product
Well explained exit strategy is very important but often left out.
You need to be familiar with the implications of the EIS and the SEIS schemes.
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Online sources of finance – CrowdFunding
Accumulation of small investments in individual projects by large number of individuals (the “crowd”) via, or with help
of Internet and social networks (De Buysere et al. 2012)
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The four forms of crowdfunding
Type Form Benefits for funders
Donation-based Donation Intangible benefits.
Reward-basedDonation or pre-
purchaseRewards in addition to intangible benefits.
Equity-based InvestmentReturn on investment if company does well.
Rewards sometimes also offered and intangible benefits may motivate too.
Debt-based LoanRepayment of loan with interest. Alternatively intangible benefits if loan given interest-free.
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Donation Crowdfunding
Contributors do not receive anything in return
Generally small amounts given
Used by individuals and for social fundraising initiatives
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Reward Crowdfunding
Contributors receive rewards/perks for contributions
Small to moderate amounts given
For-profit and nonprofits can run campaigns (some platforms only serve one of the two)
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Millie Lingerie
The Millie bra - designed by & for women after breast cancer
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Equity Crowdfunding
Contributors become part-owners
Generally 6-figure+ investment goals
Not relevant to non-profits
Generally heavily regulated in countries
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Equity Crowdfunding -
£40 million funded so far…
£250,000 largest single investment
+90,000 members
£1.9 million biggest deal
£3,100 average investment
145+ Successfully funded deals
£220,000 average deal
Stage of Growth
By Category
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How does it work?
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Peer-to-peer lending or online debt funding
Offers easier, faster and cheaper access to financing
Lending money directly to unrelated individuals or companies
Doesn’t go through a bank or traditional financial institution
Platforms help investors to fix an interest rate
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Average rate 8.6% and no early repayment penalties
Unsecured loans
£5k - £150k
Suitable for a wide range of purposes
Secured loans
£100k - £1m
All asset security agreement, or
Charge on property
Asset finance
£20k - £1m
Suitable for a wide range of hard assets
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What are the minimum criteria to apply?
Limited companies, LLPs and selected non-Ltd firms
Established companies: trading for 3+ years with at least 2 years of filed accounts
Good credit history. Upward or stable financial trends
Minimum turnover: £100,000
Directors: majority UK resident, good credit history
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Grants
Fund comes with no obligations of pay-back or interest
You maintain full control over the company
Very competitive
Application is time-consuming
Usually dedicated to new, on-off projects
Covers only part of costs, requiring match-funding
Monitoring process requires sound admin systems in place
To reduce the risk and increase the chances of success of new ideas and early stage businesses
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Sources of grant fundingLevel Funder Typical Project Recommended for
LocalCouncils, Supporting agencies
< £5k Recruit apprentices and graduates Equipment, including ICT
Regional LEPs£10k to £500k
National Innovate UK £25k to £10m Innovation-led projects Focus on 4 key sectors
Europe* EU €50k to €5m High risk R&D projects Collaboration with Universities
SocialBig Lottery, Trusts and Foundation
£500k to £1m Charities and Social Enterprises Focus on arts, heritage and community
engagement
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What are the trends
• More applicants for fewer ‘money pots’
Increasing competition
• Schemes concentrated on fewer, key economic sectors
Less coverage
• Introduction of new finance modalities (e.g. loans, gov’s
contracts) replacing some of Innovate UK’s grants
‘New’ grants
• Expected initiatives to reduce impact of leaving EU
(agricultural, structural and investment funds)
After Brexit
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To have in mind
A high quality + well written application is essential
Explaining WHAT is as important as explaining HOW
Demonstrate you know your market
Demonstrate the team has the right skills-set
Focus on impact beyond your company, i.e. jobs, jobs, jobs
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What is a Business Model?
A business model describes how an organization creates, delivers, and captures value, in economic, social, cultural or other
contexts.
The process of business model construction is part of the business strategy.
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Business Plan
Why do you need a business plan?
Raise Money Get partners Get interest in the idea/business
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Business Plan - 12 Key Questions What is the value proposition?
Who is your customer??
What is the value proposition??
What is the market opportunity??
What is the product or service??
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Business Plan - 12 Key Questions What is the value proposition?
How do you plan to make money??
What is your Strategy and Vision??
How much capital do you need??
How do you sell your product??
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Business Plan - 12 Key Questions What is the value proposition?
Who is the management team??
What are the projected financials??
What is the valuation of your company??
Do you have evidence to support your projections??
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The Classical Approach
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The classical approach
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A better way ….“Evidence Based
Entrepreneurship”
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Redefining a Start Up
Alexander OsterwalderEric Ries
Steve Blanc
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Redefining a Start Up
“A start-up is a temporary organisation in search of a scalable, repeatable, profitable business model”
– Steve Blank/Bob Dorf
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Business Model Canvas
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How to use it?
Startup Existing Business
Brainstorming tool
Business Model Mock-up
Presentation tool
Progress tracking tool
Brainstorming tool
Gap Analysis
Strategy tool
New Project Launch
Identify a problemIdentify the unknowns
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Business Model Canvas
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Business Model Canvas
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Business Model Canvas
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Business Model Canvas
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Business Model Canvas
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Business Model Canvas
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Business Model Canvas
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Business Model Canvas
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Business Model Canvas
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Business Model Canvas
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What’s Beyond the Business Model
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BizDonut
www.bizdonut.com
We are trusted advisers to company owners ensuring their business journeys are more profitable, enjoyable and productive.
www.bizdonut.com
Services
1 to 1 Coaching and Mentoring
Workshops
Consulting
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Services
One-off Strategy session
Business Surgery
Action Plan
BizBuddy
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Team
Founder, Business Development, Process
ManagementSectors: Digital,
Lifescience, Logistics, Service
Industrial Manufacturing and
ProcessesSectors: Mechanical and
Industrial Engineering
Business Development, IP, Leadership
Sectors: Lifescience, Pharma
Grant Writing, Business Development, ResearchSectors: Digital, Service,
CleanTech
Viktor Todorov Steve Walker Nick Pope Nathalia Prieto
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Team
Sales Strategy and Business Development
Sectors: Electronics, Cleantech, Digital
Technology & Distribution Process
Sectors: Food & Beverage
Manufacturing & Processing
Online Marketing and Media expert
Sectors: Digital, Service, Social, Education
Business Development, Sales and Marketing
Sectors: Digital, Service, Wholesale
Jasper Spencer Ruth Dolby Debbie Clarke Martin Holmes
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Useful Links
SEISSEIS is a tax break for investors that can greatly reduce the risk of investment. As a UK startupfounder, you should know about it.R&D Tax CreditsR&D Tax Credits are a very reliable scheme that enables HMRC to pay cash to companies that are doing innovative R&D. If you’re a “tech startup”, you probably (though not always) qualify. You can get up to 25% of your R&D spend refunded each year after you file your accounts.Innovation GrantsCheck out the grants offered for ground-breaking innovation under the Innovate UK and H2020 schemes.Patent BoxThe Patent Box is a new piece of legislation which can get solid tax breaks to profitable UK companies that own an EU patent covering some aspect of their product.
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Useful Links
SBRIsAnother TSB Grant Scheme, SBRIs are basically government contracts, 100%-funded. However, the theme is often very narrow, so if you’re lucky enough to find an SBRI in your area, this may be useful. Otherwise, not so much.Innovation VouchersTSB’s Innovation Vouchers can help fund some of your subcontracted cost in qualifying projets.Other TSB SchemesFinally, TSB run a number of ad-hoc competitions. You can find a list of those here.Startup LoansCurrently only available for entrepreneurs under 30 years old, these are actual loans at a 6% rate of interest. May be of interest to some founders.Regional Growth FundsWith £3.2b allocated for the 2011-2020 period, Regional Growth Funds can also help fund a business.
Thank You
Viktor Todorov
@viktor_kt
https://uk.linkedin.com/in/viktortodorov
+44 75 08785101
www.bizdonut.com
