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Funding Inspiration SUPPORTED BY. Funding Inspiration SUPPORTED BY Introduction A2FNW - Funding Options NatWest - Bank Finance The North West Fund Overview.

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Presentation on theme: "Funding Inspiration SUPPORTED BY. Funding Inspiration SUPPORTED BY Introduction A2FNW - Funding Options NatWest - Bank Finance The North West Fund Overview."— Presentation transcript:

1 Funding Inspiration SUPPORTED BY

2 Funding Inspiration SUPPORTED BY Introduction A2FNW - Funding Options NatWest - Bank Finance The North West Fund Overview The North West Fund for Business Loans The North West Fund for Development Capital Entrepreneur - film

3 Access to Finance Gaynor Dykes

4 Is finance really available?

5 3 years accounts Profitable trading record Forecast 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

6 What can I do to improve my chances of success?

7 Preparation & Information & Knowledge

8 Preparation Purpose Amount Timescales Repayment Period Stake Security Costs

9 Information Business Plan Up to date accounts Financial Forecasts Supporting Information

10 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

11 What are my options?

12 Debt or Equity? or both??

13 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

14 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 Mezzanine

15 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

16 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

17 North West Business Angels

18 What help can I get?

19 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?

20 Access To Finance – What We Do ‘Matching Businesses with Finance’ 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

21 Access To Finance – How We Do It Review financial performance Discuss business plan & forecasts Research finance products & providers Instigate introductions Support investment process

22 Access To Finance – Contact Details

23

24 Cashflow & Accessing Finance

25 Turbulent Times ‘There is an increased emphasis on accurate cash forecasting in a “cash burn” environment, and encouragement for imaginative solutions’ Cash Management Spring 2011 A supplement to The Treasurer Principal Sponsor RBS Group

26 External Risks Raw Material Costs Risk of Bad debts Exchange Rate Risk Increasing Overheads New legislation

27 Are we funding Asset Purchases and Working Capital in the right way? (at the right time?)

28 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)

29 EFG Scheme Summary Initiative 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

30 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

31 Features Minimum 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.

32 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

33 Letter of Credit Can better use be made of Letters of credit to deliver better terms of supply and payment?

34 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.

35 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

36 Undisclosed 2.3M Funding Package 546K 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

37 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.

38 NatWest Funds Manufacturing Fund £1B Funding for manufacturing sector Loans 100K – 25M yrs interest only Fixed rate loans 3 & 5 yrs. 1% arrangement fee Option for variable rate. Standard fees to apply UK Capital Expenditure Fund £1B Lombard Scheme ~ fund acq of Business Assets Includes joint initiative with GTS ~Capital Import Finance Scheme Specialist support for import of plant and machinery NatWest Regional Growth Fund £70M Grant support for eligible Businesses To support asset purchase where we cannot lend under normal criteria Linked to Job creation/ retention Franchise Fund £100M 2 yrs Free Banking 12m crh Discounted Arr fees www,natwest.com/franchise tel Renewable Energy Fund £50M Fund targeted at renewable energy market Managed through the Agricultural Teams / Dave Furnival BDD Community Business Loan Fund £5m Loans 30K – 500K ~ Eligible ~ Social enterprises, Charity & Community Interest Companies 200K # 1M Eligible ~ Development Finance Institutions

39 THE NORTH WEST FUND Funding Inspiration Event 7 th June JULIE BROOK HEAD OF MARKETING : NORTH WEST BUSINESS FINANCE MANAGERS OF THE NORTH WEST FUND

40 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

41 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.

42 NWBF is a holding fund, managing six experienced Fund Managers, each targeting a discrete segment of the market. FundManagerInitial allocation (£m) Development CapitalYFM Equity Partners45 Venture CapitalEnterprise Ventures30 Business LoansFW Capital35 Energy & EnvironmentalCT Investment Partners20 BiomedicalSpark Impact25 Digital & CreativeAXM Venture Capital15 STRUCTURE

43 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

44 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.

45 PROGRESS TO DATE DECEMBER 2010-APRIL 2012

46 THE INVESTMENT PROCESS Visit 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.

47 FUNDING INSPIRATION EVENT 7 TH JUNE 2012 DEBT FUNDING AND THE NORTH WEST FUND FOR BUSINESS LOANS

48 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

49 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 capital Examples: Additional working capital Stock purchases Owner-occupier property purchases Plant and machinery Capital Expenditure

50 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

51 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

52 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

53 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

54 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

55 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

56 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

57 THE FW CAPITAL TEAM ON MERSEYSIDE Simon Berry Senior Investment Executive Mobile Carol Bolland Investment Executive Mobile Stephen Molyneux Investment Executive Mobile

58 EQUITY INVESTMENT AND THE NORTH WEST FUND FOR DEVELOPMENT CAPITAL FUNDING INSPIRATION EVENT - 7 TH JUNE 2012

59 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

60 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

61 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

62 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

63 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

64 OUR LAST FOUR INVESTMENTS

65 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 Liverpool T E

66 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 Registered office: Saint Martins House, Chapeltown Road, Leeds LS7 4HZ.

67 SUMMARY Potentially £400m of investment capital targeted at SME growth. Must be invested by end 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.

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69 Funding Inspiration Master Class 2 nd July 2012 Liverpool Chamber Through special application and assessment only through these taster events, please take an application form or apply on line at SUPPORTED BY

70 Funding Inspiration Master Class 2 nd 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

71 Funding Inspiration Thank you for attending SUPPORTED BY


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