ImagesMagUK_February_2021

BUSINESS DEVELOPMENT www.images-magazine.com 24 images FEBRUARY 2021 What funding options are available for my business? T he most appropriate business funding for you will depend on why you need it. Typically, it will be for one of the following key reasons: ■ To grow, whether from start-up or to expand an already successful business. That may mean funding for expansion into new markets, buying new equipment or increasing the quality of the team. ■ To manage cashflow problems. This is where a business anticipates problems ahead, or to get you through a challenging time. ■ To manage late payment. There are two types of funding: Equity Where the funder receives a share (equity) of the business. You do not need to pay this money back, but you will need to share all future profits and a proportion of the business when you sell it. The investor may take some control over your business to protect their investment. Debt This is a loan and you need to repay the money with interest. This will vary depending on the risk of you not repaying the money. Debt may be secured on company assets (typically property or machinery) and/ or with a personal guarantee from the directors. This means that whether a company is limited or not, the directors are personally liable to repay the debt. You may also be eligible for a government grant or loan. This will depend on your region, your sector and even your personal circumstances. However, it is well worth checking out if you qualify. Covid help is particularly attractive at the moment. For example, the Business Bounce Back loan doesn’t need to be repaid for the first year, is relatively easy to obtain (without guarantees), and has very low interest rates. I recommend checking out this option first to determine if you meet the eligibility criteria. Plan, rather than react You should plan to respond to, not to react to, commercial opportunities and threats. Investors and lenders will avoid giving money to businesses that don’t have effective capital management in place. Many directors shun taking on personal debt or wouldn’t be given the amount of money they need, so prefer to give away part of the business (and the risk) in return for equity investment. This can be from three types of investor: Venture capitalists These invest in companies that have fast, high- growth potential (they’re looking for a tenfold increase in their investment). They’re run by professional investors and are managing the money on behalf of someone else (eg pension funds, wealthy individuals). They normally look to invest large amounts, from £1m. Strategic investors These invest in companies for strategic reasons, such as to get access to technology. Amounts can vary hugely. Angel investor These are individuals, or groups of individuals, who invest smaller amounts and take higher risks without immediate expectations of returns. They’re typically only suitable for start-up companies. If you’re an established company, you’re probably looking for either venture capital (VC) funding or debt funding. If it’s the latter, do look at all the options available. Banks are not the only (or always the best) place to get debt funding. A lender and a VC will both score an application by reviewing the following points: Character What’s your story? Have you already proven your business aptitude? Do they ‘like’ you? Do they trust you? Capacity Can the business repay its debts? If you want investment, you’re asking people to trust you with their money. If you have a history of county court judgements, you will struggle. Capital Have you got money, what does your balance sheet look like? This may seem ironic, given you’re trying to raise money, but few will lend to (or invest in) a business that is already struggling, unless there is a reason for that struggle that will soon be resolved. Conditions External factors surrounding the business; for example, if you’re currently struggling because of Covid, but had a strong business beforehand, investors will take that into account. However, if you supply uniforms to sandwich bars in central London, they may decide that conditions are against you at this point in time. Good luck! Expert advice on the business of running a garment decoration company Q&A Steve Taklalsingh is the MD and CFO of Amaiz, which is on a mission to transform the lives of businesses by providing quick and easy financial, payment and receipt management in one app. Amaiz combines the features of accountancy software with online banking-like features so that all can be automated and carried out ‘on the go’. www.amaiz.com